.3 


THE  LIBRARY 

OF 

THE  UNIVERSITY 
OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


3 


ELEMENTS 


OF  THE 


LAW  OF  PARTNERSHIP 


BV 

FLOYD  R.  MECHEM,  LL.  D. 

Author  of  Mechem  on  Agency,  Mcchem  on  Public  Officers,  Mechem  on  Sales.  e«c. 

Formerly  Tappan  Professor  of  Law  in  (be  University  of  Michigan, 

Professor  of  Law  in  the  University  of  Chicago. 


SECOND  EDITION 


CHICAGO 

CALLAGHAN  AND  COMPANY 
1920 


COPYRIGHT,  1896 

BT 

FLOYD  R.  MECHEM 
COPYRIGHT,  1920 

BT 

FLOYD  B.  MECHEM 


\no 


PREFACE  TO  THE  SECOND  EDITION 

The  considerable  growth  of  the  law  of  Partnership  in  the 
last  twenty-four  years  and  especially  the  advent  of  the  Uniform 
Partnership  Act  have  been  thought  to  justify  a  new  edition  of 
this  little  book.  Several  new  sections  have  been  added,  the 
Uniform  Partnership  Act  has  been  incorporated,  and  the  range 
of  citation  of  cases  has  been  somewhat  extended;  otherwise  its 
scope  and  purpose  have  not  been  changed.  It  has  seemed  de- 
sirable to  renumber  the  sections. 

FLOYD  R.  MECHEM. 

UNIVERSITY  OF  CHICAGO, 
May  1,  1920. 


PREFACE  TO  FIRST  EDITION 

Several  years  ago  the  writer  printed  for  the  use  of  his  class 
a  brief  course  of  lectures  on  Partnership.  A  wider  demand  for 
them  having  sprung  up,  they  have  been  revised  and  reprinted 
in  the  hope  that  they  may  be  useful  to  students  elsewhere.  They 
pretend  to  be  nothing  more  than  the  mere  elements  of  the  sub- 
ject, and  the  endeavor  has  been  to  keep  them  in  small  compass. 
The  citation  of  authorities  has  been  purposely  limited  to  the 
leading  and  most  readily  accessible  cases,  and  those  cited  have 
been  selected  rather  as  illustrations  of  the  text  than  as  authori- 
ties for  it.  Much  statement  of  cases  in  the  text  has  been  avoided, 
because  the  lectures  were  designed  to  be  used  and  were  in  fact 
used  in  connection  with  a  volume  of  selected  cases  upon  the 
subject. 

It  is  assumed  that  the  study  of  Agency  will  precede  that  of 
Partnership,  and  some  knowledge  of  the  former  subject  has 
been  constantly  taken  for  granted.  If  the  style  at  times  seems 
to  be  didactic,  the  circumstances  of  the  original  composition  will 
serve  as  an  explanation. 

FLOYD  R.  MECHEM. 

UNIVERSITY  OP  MICHIGAN, 

Ann  Arbor,  May  1, 1896. 

iii 

GGV852 


TABLE  OF  CONTENTS 


[REl-ERENCES   ARE  TO  SECTION'S] 

CHAPTER  I. 
DEFINITIONS  AND  DISTINCTIONS. 

Partnership   defined    1 

The    characteristic    elements 2 

Partnership  a  commercial  association 3 

Is  a  contractual  relation 4 

Is  a  voluntary  relation.     The  delectus  personarwn 5 

Is  a  partnership  a  distinct  entity  ? 6 

The  commercial  conception  of  partnership 7 

How  a  partnership  differs  from  a  corporation 8 

Intermediate   associations 9 

Clubs,  societies,  etc 10 

Joint-tenancy  and  co-ownership 11,   12 

Joint  purchasers  of  goods,  etc.,  for  division,  use,  etc 13 

Joint  purchasers  of  goods,  etc.,  for  resale 14 

Workmen  dividing  product  or  proceeds 15 

Joint    ventures — Syndicates 16 

Members  of  defectively  organized  corporations ».  17-  19 

•  Causes  of  failure  to  incorporate , 20-  23 

Effect  of  estoppel 24,   25 

The  doctrine  of  contractual  limitation 26 

The  doctrine 'that  no  one  but  the  State  may  raise  the  question  27 

Eights  as  partners  in  such  cases 28 

Promoters  of  companies 29 

Contemplated  partnerships 30,    31 

Classification  of  partnerships 32,    33 

Peculiar  forms  of  partnership — Joint  stock  companies — Part- 
nership associations — Mining  partnerships — Limited  partner- 
ships— Sub-partnerships  34-  39 

Trust   or  partnership 40 

Classification  of  partners 41 


TABLE  OF  CONTENTS 
[REFERENCES  ARE  TO  SECTIONS] 

CHAPTER  II. 
FOE  WHAT  PUEPOSE  A  PAETNERSHIP  MAY  BE  CREATED. 

For  any  lawful  business 42 

Series  of  acts,  continuous  business,  single  adventure 43 

Not  for  purposes  unlawful  or  opposed  to  public  policy 44 

Purposes  illegal  in  part 45 

Effect  of  illegality 46 

CHAPTER  III. 

WHO  MAY  BE  PAETNEES. 

In  general,  any  person  competent  to  contract 47 

Aliens  as  partners 48 

Infants  as  partners 49,    50 

Insane  persons  as  partners 51 

Married  women  as  partners 52 

Corporations   as   partners 53 

Firms  as  partners 54 

Agent,  etc.,  as  partner 55 

How  many  partners  there  may  be 56 

Of  the  delectus  personarum 57 

Of  ' '  sub-partnerships ' '   so-called 58 


CHAPTER    IV. 

OF  THE  CONTRACT  OF  PAETNEESHIP  AND  THE 
EVIDENCE   THEEEOF. 

No  particular  formalities  required 59 

How  affected  by  the  statute  of  frauds — Contracts  not  to  be  per- 
formed within  one  year 60 

— -  Partnerships  in  lands 61 

— —  Partnership   in   chattels 61a 

Consideration  for  the  contract •  62 

When  the  contract  takes  effect 63 

Question  of  the  existence  of  a  partnership  one  of  mixed  law  and 

fact   64 

Means  of  proof 65 

Burden  of  proof 66 

vi 


TABLE  OP  CONTENTS 
[REFERENCES  ARE  TO  SECTIONS] 

CHAPTER  V. 

WHAT  ACTS  AND  CONTRACTS  CREATE  A  PARTNERSHIP. 

How  question  arises 67 

Partnership  inter  sese  and  as  to  third  persons 68 

I.  OF  TRUE  PARTNERSHIPS. 

True  partnerships,  how  classified 69 

Of  partnerships  expressly  intended 70 

Of  agreements  held  to  create  partnerships  inter  aese  when  that 

was  not  intended 71 

Legal  intention  of  parties  controls 72,  73 

Tests  of  intention  to  form  partnership 74 

•  •  Agreements  to  share  both  profits  and  losses 75—  77 

— —  Agreements  to  share  profits,  nothing  being  said  about  losses . .  78-  80 
Agreements  to  share  profits  with  express  stipulation  against 

losses  81 

Partnership  in  profits  only 82 

Agreements  to  share  gross  returns 83 

Agreements  to  share  losses  only 84 

II.  Or  SO-CALLED  QUASI-PARTNERSHIPS. 

Of  partnerships  as  to  third  persons 85 

1.  Of  Sharing  Profits. 

Sharing  profits  was  formerly  a  ground  of  liability  to  third  persons 

as  a  partner  86,    87 

Of  the  case  of  Cox  v.  Hickman 88-  90 

Effect  of  Cox  v.  Hickman  on  English  law 91 

Effect  of  Cox  v.  Hickman  in  the  United  States 92 

Beecher  v.  Bush : 93 

Harvey  v.  Childs   .• 94,    95 

Meehan  v.  Valentine 96-  98 

2.  Of  Holding  Out  as  a  Partner. 

Person  may  become  liable  as  a  partner  by  holding  himself  out  as 

one    99-101 

What  facts  must  exist 102 

Who  may  enforce  liability? 103, 104 

Holding  out  to  the  world 105 

Methods  of  holding  out 106 

Evidence  admissible  107 

The  effect 108-111 

vii 


TABLE  OP  CONTENTS 

[REFERENCES  ARE  TO  SECTIONS] 

CHAPTER  VI. 

OF  SOME   INCIDENTS   OF   PARTNERSHIPS  —  PARTNERSHIP 

ARTICLES,  FIRM  NAME,  GOOD  WILL,  PARTNERSHIP 

PROPERTY. 

In  general    • 112 

I.  Or  ARTICLES  OF  PARTNERSHIP. 

Of  the  necessity  of  articles 113 

Of  the  scope  of  articles 114 

Of  the  construction  of  articles 115 

Of  waiving  or  enlarging  express  conditions  by  conduct 116 

Of  continuing  partnership  under  former  articles 117 

Of  the  usual  clauses  in  partnership  articles 118 

Of  the  enforcement  of  the  provisions — Arbitration — Specific  per- 
formance      119 

II.  OF  THE  FIRM  NAME. 

Of  the  need  of  a  firm  name 120 

What  name  may  be  adopted 121 

Use  of  different  name .122 

What  may  be  done  in  the  firm  name — Executing  contracts,  bonds, 

deeds — Actions  at  law 123 

Of  the  firm  name  as  property 124 

Of  the  right  to  the  firm  name  upon  dissolution 125, 126 

III.  OF  THE  GOOD-WILL. 

What  is  meant  by  the  good-will 127 

Good-will  as  an  asset 128 

Disposition  of  good-will  on  dissolution 129 

Effect  of  sale — Right  to  use  firm  name 130 

Limitations  resulting  from  sale  of  good-will  upon  right  to  carry  on 

competing  business    131, 132 

IV.  OF  THE  CAPITAL  or  THE  FIRM. 

What  constitutes  capital 133 

Fixing  amount  and  interests 134 

Certificates  or  other  evidence  of  interest 135 

What  may  be  received  as  contributions  to  capital 136 

Enforcing  contribution  of  capital 137 

viii 


TABLE  OF  CONTENTS 

[REFERENCES  ABE  TO  SECTIONS] 

V.  Or  THE  PROPERTY  OF  THE  FIRM. 

1.  Of  Firm  Property  in  General. 

What  may  be  partnership  property 138 

What  constitutes  partnership  property 139 

Property  bought  by  partner  in  his  own  name 146 

• Property  used  by  the  firm 141 

Partners '  ' '  lien ' '  on  property 142 

Nature  of  each  partner's  interest  in  the  firm  property 143,144 

Extent  of  each  partner  'a  interest 145 

The  transfer  of  shares 146, 147 

Seizure  of  partner 's  share  by  his  individual  creditor 148, 149 

2.  Of  the  Title  to  Personal  Property. 

May  be  held  in  firm  name 150 

May  be  held  in  name  of  one  partner  for  the  firm 151 

Title  is  in  partners  collectively 152 

3.  Of  the  Title  to  Seal  Estate. 

Older  rule — Legal  title  to  real  property  cannot  ordinarily  be  taken 

in  firm  name  153 

But  the  equitable  title  is  in  the  firm 154 

Modern  rule  more  liberal — Uniform  Partnership  Act 155 

When  land  is  partnership  property 156 

Land  acquired  during  the  partnership 157-159 

Land  acquired  prior  to  the  partnership 160, 161 

Nature  of  partner's  interest  in  partnership  realty 162 

Partnership  realty,  when  deemed  personal  estate 163, 164 

Dower  in  partnership  land   165, 166 

Bona  fide  purchaser  from  partner  having  legal  title 167 

Notice  from  possession  by  the  firm   168 

Interest  of  surviving  partner  in  firm  realty 169 

CHAPTER  VII. 

THE  EIGHTS  AND  DUTIES  OF  PAETNEES  TOWARDS 
EACH  OTHEB. 

Duty  to  exercise  good  faith 170 

Duty  to  devote  himself  to  advancement  of  firm 's  interests 171 

Duty  not  to  carry  on  other  business  to  prejudice  of  firm 172 

Duty  to  exercise  care  and  skill 173 

Duty  to  conform  to  partnership  agreements   174 

Duty  of  partners  to  keep  accounts — Eight  of  inspection 175 

ix 


TABLE  OF   CONTENTS 

[REFERENCES  ARE  TO  SECTIONS] 

Duty  to  consult  with  each  other 176 

Eight  of  each  partner  to  share  in  management,  knowledge  and  con- 
trol of  the  business 177 

Eight  of  partner  to  extra  compensation 178 

May  be  agreement  to  pay  it 179 

Liability  of  partner  for  not  performing  agreed  service 180 

Partner 's  right  to  return  of  advances 181 

Eight  of  partner  to  interest  on  money  advanced — On  capital 182, 183 

Eight  of  partners  to  have  partnership  property  applied  to  partner- 
ship debts 184 

Partner  may  not  apply  partnership  property  to  his  own  uses. .  185 

Claims  of  partnership  creditors  based  on  rights  of  partners. .  186 

Partner's  right  to  contribution  from  co-partners 187 

On  illegal  transactions 188 

Upon  what  basis  determined 189 

How  enforced   190 

Eight  of  other  partners  to  indemnity  for  losses  caused  by  a  part- 
ner's misconduct > 191 

CHAPTER  VIII. 
OF  DEALINGS  BETWEEN  PABTNEES  AND  WITH  THE  FIBM. 

In  general 192 

Dealings  between  partners 193 

Dealings  between  firm  and  partner 194, 195 

Dealings  between  firms  having  a  common  partner 196 

CHAPTER  IX. 

OF  ACTIONS  BETWEEN  PAETNEES. 
Of  actions  between  partners  in  general 197 

I.  ACTIONS  AT  LAW. 
In  what  cases  the  question  arises 198 

1.  Partner  Against  Firm. 

One  partner  cannot  sue  the  firm  at  law 199,  200 

2.  Firm  Against  Partner. 

Firm  cannot  sue  one  partner  at  law 201,  202 

3.  Partner  Against  Partner. 

One  partner  cannot  sue  another  at  law  on  claims  involving  part- 
nership transactions 203 


TABLE  OF  CONTENTS 
t REFERENCES   AEE  TO  SECTIONS] 

Beason  for  the  rule 204 

When  rule  does  not  apply — Single  completed  transaction....  205 

When  relation  was  not  a  partnership — Joint  ventures 206 

One  partner  may  sue  another  at  law  upon  claim  connected  with 

but  not  constituting  partnership  transactions 207 

As  for  not  forming  partnerships  as  agreed 208 

Or  for  dissolving  contrary  to  agreement 209 

Or  for  not  furnishing  capital  as  agreed 210 

Or  for  not  reimbursing  for  capital  advanced 211 

Or  for  not  indemnifying  as  agreed 212 

Or  for  not  paying  debts  assumed 213 

One  partner  may  sue  another  for  breach  of  partnership  agreement  214 

One  partner  may  sue  another  for  wrongful  practices  resulting  in  215 

loss  215 

One  partner  may  sue  another  for  fraud  in  inducing  or  in  settling 

the  partnership,  etc 216 

One  partner  may  sue  upon  a  partnership  transaction  by  agreement 

transformed  into  individual  one  217 

On  matters  distinct  from  partnership  one  partner  may  sue  another  218 

4.  Firm  against  Firm  having  Common  Partners. 

One  firm  cannot  sue  another  at  law  if  there  is  a  common  partner. .  219 
Assignee — Code 220 

II.  OF  ACTION  IN  EQUITY. 

Equity  the  proper  tribunal  in  partnership  matters 221 

1.  Specific  Performance. 
In  what  cases  granted 222-225 

2.  Of  Injunctions. 

In  what  cases  granted 226 

3.  Of  Accounting  and  Dissolution. 

In  what  cases  granted — Accounting  without  a  dissolution 227,  228 

Nature  of  remedy  by  accounting — What  included .- . . .  229 

Who  may  demand  accounting 230 

4.  Of  Receivers. 

When  will  be  appointed 231 

Powers  and  duties  of  receiver  232 

5.  Action  by  One  Partnership  Against  Another  Having  Common  Partners. 

Jurisdiction  of  equity   233 

xi 


TABLE  OF  CONTENTS 

[REFERENCES  ARE  TO  SECTIONS] 

CHAPTER  X. 

OF  THE  AUTHOEITY  OF  PARTNERS. 
In  general 234 

I.  AUTHORITY  AS  BETWEEN  THE  PARTNERS  THEMSELVES 

As  between  themselves,  partners  may  fix  authority  by  agreement. .  235 

If  no  authority  agreed  upon,  usual  authority  implied 236 

II.  AUTHORITY  AS  BETWEEN  THE  FIRM  AND  THIRD  PERSONS. 

Of  what  matters  third  persons  must  take  notice 237 

Continued  existence  of  partnership  relation 238 

Evidence  of  an  adverse  interest  239 

Nature  and  extent  of  business  to  be  observed 240 

Distinction  between  trading  and  non-trading  firms 241 

The  power  of  a  partner  to  impose  restrictions  by  dissent. . . .   242,243 

Of  .the  partner  as  agent  of  the  partnership 244, 245 

Partner  has  no  implied  authority  outside  of  scope  of  business. . . .  246 

What  meant  by  scope 247 

Extending  original  scope  by  subsequent  conduct 248 

Consideration  of  particular  authorities   249 

Admissions,  representations  and  declarations 250 

Agents — Appointment  of   251 

Arbitration    252 

Assignment  for  creditors  253 

Attorneys — Employment  of  254 

Bills  and  notes  255,  257 

Borrowing  money 258 

Buying 259 

Collecting  and  receiving  payment 260 

Compromising  debts 261 

Confessing  judgment     262 

—  Deeds,  bonds  and  other  instruments  under  seal 263,  264 

Hiring  or  leasing  property   265 

Insurance    266 

—  Mortgages  and  pledges 267-269 

—  Notice 270,271 

—  Paying   debts    272, 273 

Sales 274,  275 

Suits  at  law   276 

Suretyship  and  guaranty   277 

Of  the  authority  of  a  managing  partner 278,  279 

Several  managers — Directors  280 

xii 


TABLE  OF   CONTENTS 

[REFERENCES  ARE  TO  SECTIONS] 

Of  the  powers  of  a  majority  281, 282 

[Ratification  of  unauthorized  acts  283 

CHAPTER  XI. 

WHO  ARE  BOUND  BY  THE  ACTS  OF  A  PARTNER. 

k 
In  general 284 

I.  IN  CONTRACT. 

All  partners  bound  by  authorized  contracts  285, 286 

Dormant,  secret  and  nominal  partners  bound  also 287 

Liability  of  the  firm  upon  contracts  made  by  one  partner  in  his 

own  name 288 

Known  partnership — Simple  contracts  in  name  of  one  partner  289, 290 

'Note  of  one  partner -. . .  291 

Unknown  partnership 292 

Contracts  under  seal 293 

Judgment  against  one  partner 294 

Contracts  made  in  individual  names  of  all  the  partners 295 

Contracts  where  firm  does  business  in  name  of  one  partner 296 

Particular  contract  made  by  firm  in  name  of  one  partner 297 

Contracts  where  there  are  two  firms  of  same  name  with  common 

partner   298 

Contracts  where  same  persons  constitute  different  firms  with  dif- 
ferent names 299 

Liability  of  partner  who  exceeds  his  authority 300 

II.  IN  TORT. 

Firm  liable  for  torts  of  one  partner  committed  in  course  of  business          301 

Liability  of  firm  for  partner's  malicious  or  criminal  act 302 

Uniform  Partnership  Act    303 

Liability  of  firm  for  partner 's  breach  of  trust 304,  305 

CHAPTER  XII. 

THE  LIABILITY  OF  THE  FIRM  FOR  THE  ACTS  OF  ITS 
AGENTS  AND  SERVANTS. 

Firm  liable  like  other  principals  for  acts  of  its  servants  and  agents          306 

CHAPTER  XIII. 

OF  THE  NATURE  AND  EXTENT  OF  THE  LIABILITY 
OF   PARTNERS. 

In   general    307 

xiii 


TABLE  OP  CONTENTS 
[REFERENCES  ARE  TO  SECTIONS] 

f.  OP  THE  NATURE  OP  PARTNERSHIP  OBLIGATIONS 

Partnership  obligations  when  arising  on  contract  are  joint 308 

Judgment  against  one  partner  releases  others 309,  310 

Release  of  one  releases  all 311 

Partnership  obligations  arising  from  tort  are  joint  and  several...  312 

II.  OF  THE  EXTENT  OF  PARTNERSHIP  LIABILITY. 

Each  partner  liable  in  solido  for  partnership  obligations 313 

Individual  property  of  partner  may  be  taken  to  satisfy  partnership 

debt   314 

Partner  paying  debt  may  have  contribution 315 

Exemptions  from  execution  on  partnership  property 316 

III.  OF  THE  BEGINNING  AND  ENDING  OP  LIABILITY. 

In  general 317 

Of  an  incoming  partner  under  the  common  law 318,  319 

Under  the  Uniform  Partnership  Act 320 

Of  an  outgoing  partner 321,  322 

CHAPTER  XIV. 

OP  ACTIONS  BY  AND  AGAINST  THE  PARTNERSHIP. 
In  general 323 

I.  PARTIES  TO  ACTIONS  BY  THE  PARTNERSHIP. 
Who  should  sue  in  actions  by  the  firm 324 

1.  In  Contract. 

a.  Contracts  made  in  firm  name 325,  326 

6.  Contracts  made  in  name  of  one  partner  for  the  firm 327 

Actions  cannot  usually  be  brought  in  firm  name 328 

One  suing  for  all  where  partners  are  very  numerous 329 

2.  In  Tort. 
All  partners  must  sue  for  torts  affecting  firm 330 

3.  Effect  of  Personal  Disability. 

Effect  of  disability  of  one  partner — Recovering  property  wrong- 
fully disposed  of  by  him 331 

II.  PARTIES  TO  ACTIONS  AGAINST  THE  PARTNERSHIP.  » 

Who  should  be  sued  in  actions  against  the  firm 332 

xiv 


TABLE  OF   CONTENTS 
[REFERENCES  ARE  TO  SECTIONS] 

1.  In  Contract. 

All  actual  and  ostensible  partners  should  be  joined 333 

How  when  contract  made  in  name  of  one  partner 334 

Dormant  and  secret  partners  proper  but  not  necessary  parties....  335 

Nominal  partners 336 

Firm  as  such  not  to  be  sued  except  by  statute 337 

2.  In  Tort. 

Actions  of  tort  may  be  brought  against  all  or  any  of  the  partners.  338 

No  action  against  firm  except  by  statute 339 

III.  SET  OFF  IN  ACTIONS  BY  AND  AGAINST  THE  PARTNERSHIP. 

Set  off  of  individual  and  partnership  claims 340 

Under  statutes    341 

In  equity  342 

CHAPTER  XV. 
OF  THE  DISSOLUTION  OF  THE  PARTNERSHIP. 

Purpose  of  this  chapter 343 

Of  the  methods  of  dissolution  in  general 344 

I.  DISSOLUTION  BY  ACT  OF  THE  PARTIES. 
1.  Dissolution  ~by  Original  Agreement. 

What  methods  included  345 

Dissolution  by  lapse  of  time 346 

Dissolution  by  accomplishment  of  object 347 

Dissolution  upon  a  prescribed  event  of  condition. '. 348 

2.  Dissolution  by  Subsequent  Act  of  Parties. 

In  general 349 

Dissolution  by  act  of  all — Mutual  consent 350 

Dissolution  by  act  of  one  partner — Partnerships  at  will 351 

Dissolution  by  act  of  one  partner — Partnership  on  condition 352 

Dissolution  by  one  partner  when  for  definite  period — Dissolution 

in  contravention  of  partnership   agreement 353,  354 

Can  there  be  an  indissoluble  partnership? 355-358 

Method  of  dissolving  by  act  of  partner 359 

II.  DISSOLUTION  BY  HAPPENING  OF  EVENTS. 

What  here  included 360 

Death  of  a  partner 361 

XV 


TABLE   OF    CONTENTS 

[REFERENCES  ARE  TO  SECTIONS] 

Bankruptcy  of  a  partner 362 

Assignment  or  seizure  of  partner 's  interest 303 

Voluntary  sale  of  interest  by  one  partner 364 

Insanity  of  a  partner 365 

Marriage  of  partner  366 

Guardianship  of  a  partner 367 

Expulsion  of  a  partner 368 

War    369 

Illegality    370 

Happening  of  a  stipulated  event 371 

Reorganization — Incorporation   372 

III.  DISSOLUTION  BY  JUDICIAL  DECREE. 

Declaring  void  ,  373 

Dissolving  in  equity 374 

Causes  for  dissolution — Fraud 375 

—  Insanity  or  incapacity  of  partner 376 

—  Misconduct  of  a  partner 377 

—  Must  not  be  misconduct  of  partner  seeking  dissolution 378 

—  Irreconcilable  discord   379 

—  Impossibility  of  success 380 

—  Under  Uniform  Partnership  Act 381 

Receivership  in  these  cases 382 

CHAPTER  XVI. 

OF  THE  NOTICE  OF  THE  DISSOLUTION. 

In  general 383 

I.  NOTICE  TO  PARTNERS. 

On  dissolution  by  act  of  a  partner 384 

On  dissolution  by  happening  of  events 385 

Under  Uniform  Partnership  Act , . . .  386 

II.  NOTICE  TO  THIRD  PERSONS. 

The  necessity  of  notice  to  them 387 


In  what  cases  notice  is  required— Not  on  dissolution  by  mere  opera- 


tion of  law. 


388 


—  Required  on  dissolution  by  or  through  act  of  parties 389 

To  whom  notice  required 399 

How  notice  given— 1.  To  those  who  have  had  dealings  with  the  firm  391,  392 
How  notice  given— 2.  To  those  who  have  not  had  dealings  with  the 

firm    " 393,394 

Knowledge — Constructive  notice  395 

xvi 


[REFERENCES  ARE  TO  SECTIONS] 

Who  should  give  notice — Actual  and  ostensible  partners 396 

Dormant  and  secret  partners ,  397 

Effect  of  not  giving  notice 398 

CHAPTER  XVII. 

OF  THE  EFFECT  OF  DISSOLUTION  UPON  THE  EIGHTS  AND 
AUTHORITY  OF  PAETNERS. 

In  general 399 

1.  Dissolution  by  Death. 

Effect  on  rights  and  liabilities  of  the  firm ,      400 

Effect  on  authority  of  firm  as  agent  of  third  persons 401 

Eights,  powers  and  liabilities  of  the  surviving  partner 402, 403 

Where  there  are  several  survivors 404 

Statutory  changes  in  some  states 405 

Uniform  Partnership  Act  , 406 

Continuing  business  under  provisions  of  will 407 

Continuing  in  pursuance  of  partnership  articles 408 

Continuing  in  pursuance  of  personal  agreements 409 

Provisions  that  survivor  shall  acquire  interest  of  deceased 410 

Liability  of  estate  of  deceased  partner  for  existing  debts 411 

2.  Dissolution  by  Bankruptcy,  Insolvency,  Assignment,  Etc. 

In  general 412 

Bankruptcy,  insolvency,  or  assignment  of  entire  firm 413 

Bankruptcy  of  one  partner — Solvent  partner  may  administer ....  414 

Insolvency,  assignment,  selling  out  of  one  partner 415,  416 

Eights  of  assignee  of  such  partner 's  interest 417 

Other  causes  418 

3.  Dissolution  by  Judicial  Decree. 

Receivership  usually  results    419 

4.  Dissolution  by  Other  Causes. 

Eights  and  liabilities  of  partners  after  dissolution — In  general . . .  420 

Authority  of  firm,  as  agent  for  third  persons,  after  dissolution.  . . .  421 
Eights  of  partners  after  dissolution  under  Uniform  Partnership 

Act — Effect  of  wrongful  dissolution 422 

Authority  of  partners  after  dissolution — Authority  continues  for 

the  purpose  of  closing  up  the  business , 423,  424 

No  authority  to  create  new  obligations 425 

Authority  of  settling  or  liquidating  partner 426 

xvii 


TABLE  OP   CONTENTS 
[BEFERENCES  AKE  TO  SECTIONS] 

CHAPTER  XVIII. 

OF  SPECIAL  AGEEEMENTS   BETWEEN   THE    PAETNERS 
AT  DISSOLUTION. 

Agreements  as  to  distribution  of  property  or  payment  of  debts..          427 

Creating  relation  of  principal  and  surety 428 

Creditor 's  assent  to  arrangement 429 

CHAPTER  XIX. 
OF  THE  SO-CALLED  LIEN  OF  PAETNEES. 

In  general 430 

Nature  of  the  right  431 

When  it  becomes  important 432 

To  what  the  lien  attaches 433 

Against  whom  lien  exists 434 

What  the  lien  secures 435 

How  lien  is  lost 436 

No  lien  if  partnership  illegal 437 

CHAPTER  XX. 

OF  THE  APPLICATION  OF  THE  PAETNEESHIP  AND  INDIVIDUAL 
ASSETS  TO  THE  CLAIMS  OF  CEEDITOES. 

In  general  . , 438 

What  principles  control 439 

I.  Application  of  the  assets  of  a  partnership  by  the  partnership 

creditors    440 

II.  Application  of  the  assets   of  a  partnership  by  the  partners 

themselves    441 

Bight  to  pay  joint  but  not  partnership  debts  out  of  partner- 
ship assets 442 

Eight  to  pay  individual  debts  of  all  the  partners 443 

Eight  to  assume  or  pay  individual  debt  of  one  partner 444 

Eight  of  partner  to  apply  individual  assets  to  firm  debts ....  445 

Eight  of  partners  to  convert  firm  property  into  individual 

property    446-448 

III.  Application  of  assets  when  distributed  by  court — Firm  cred- 
itors first  paid  out  of  firm  assets 449 

Joint  but  not  partnership  creditors  not  preferred 450 

Partner  cannot  compete  with  firm  creditors 451 

One  partner's  share  cannot  be  reached  by  his  creditors  until 

partners'  claims  against  firm  are  satisfied 452 

xviii 


TABLE  OF   CONTENTS 

[REFERENCES  ARE  TO  SECTIONS] 

Individual  creditors  usually  given  priority  in  individual  assets 

of  a  partner   453 

Contrary  views 454 

How  where  there  are  individual  but  no  partnership  assets...  455 

Firm  cannot  compete  with  individual  creditors 456 

Partner  competing  with   partnership  creditors  in   individual 

assets  457 

Obtaining  claims  against  both  estates  by  contract 458 

Application  of  assets  when  there  was  no  ostensible  partnership — 
When  there  was  merely  an  ostensible  but  not  an  actual  part- 
nership    459, 460 

Application  of  assets  of  firms  having  one  or  more  partners  in  com- 
mon    461 

Application  of  assets  where  there  are  successive  firms 462 

Equitable  rules  do  not  defeat  legal  priorities 463 


CHAPTER  XXI. 

OF  THE  FINAL  ACCOUNTING. 

Necessity  of  accounting 464 

Basis  of  the  accounting 465 

Right  of  general  creditors  to  present  their  demands 466,  467 

Partnership  debts  to  be  first  paid 468 

Manner  of  accounting 469, 470 

Uniform  Partnership  Act 471 

Loss  of  capital,  how  borne 472, 473 

Opening  and  restating  accounts 474 


CHAPTER  XXII. 

OF  LIMITED  PAETNERSHIPS. 

Of  the  nature  of  such  partnerships 475 

Must  be  authorized  by  statute 476 

The  usual  statutory  requirements 477 

Necessity  for  complying  with  requirements 478 

Who  may  form  them 479 

For  what  business 480 

Conduct  of  business 481 

Withdrawal  of  capital 482 

Special  partner  as  a  creditor 483 

Renewal  484 

Dissolution  and  notice 485 

xix 


TABLE   OF   CONTENTS 

APPENDIX  A.  PAGE 

PARTNERSHIP  STATUTES    417 

APPENDIX  B. 
PARTNERSHIP  FORMS 443 


INTRODUCTION 


In  general. — In  a  rather  general  way,  what  we  call  the  law 
may  be  said  to  consist  of  the  rules  which  prescribe  and  deter- 
mine the  legal  form  and  effect  of  human  relationships  and  ac- 
tivities. Inasmuch  as,  in  a  general  way,  one  may  frequently 
act  either  alone  or  in  conjunction  with  others,  a  rather  obvious 
though  somewhat  loose  classification  may  be  made  into  (1)  the 
law  of  individual  activity,  and  (2)  the  law  of  associated  activity. 
The  latter  body  of  law,  which  may  be  called  the  law  of  associa- 
tions, could  be  divided  into  two  fields,  namely,  (1)  The  law 
of  incorporated  associations  (meaning  by  "incorporated"  that 
they  have  received  some  special  charter  or  franchise  from  the 
State  to  exist  or  act  as  an  associated  body),  and  (2)  The  law  of 
unincorporated  associations  (sometimes  though  erroneously 
called  "voluntary"  associations).  Of  each  there  would  be  many 
classes,  but  one  classification  would  be  into  those  which  were 
created  to  carry  on  a  business,  as  distinguished  from  those 
whose  purpose  was  social,  political,  religious,  educational^  or  the 
like.  "We  might  thus  have  unincorporated  associations  organized 
for  the  purpose  of  carrying  on  a  business  with  a  view  to  pe- 
cuniary profit.  When  we  have  reached  that  point  we  have  ar- 
rived, as  will  be  more  fully  seen  from  the  discussion  which  will 
follow,  pretty  nearly  if  not  quite  at  the  modern  law  of  Part- 
nership. 

Historical.— Partnership  is  of  ancient  origin.  It  was  known 
to  the  Romans  and  rather  highly  developed.  It  was  adopted 

xxi 


INTRODUCTION 

and  regulated  by  statutes  in  the  commercial  cities  of  Europe, 
and  was  thence  engrafted  upon  the. English  common  law.  Since 
its  incorporation  into  the  latter  system  it  has  lost  many  of  its 
former  characteristics  and  has  acquired  others  which  were  en- 
tirely unknown  to  it  in  its  origin. 

The  following  comparison  of  the  English  and  the  Roman  Law 
of  Partnership  will  be  of  interest : 


"The  English  Law  of  Partnership,"  says  Mr.  Scrutton,!  "is  derived 
from  three  sources,  the  Common  Law,  the  Lex  Mercatoria,  and  the  Koman 
Law.  Of  the  Lex  Mercatoria  we  need  only  say  here  that  it  appears  in  itself 
to  have  been  at  least  partly  based  on  Roman  law.  Mr.  Justice  Story  has  made 
an  elaborate  and  detailed  investigation  of  the  relations  of  the  Common  to 
the  Roman  Law,  and  finds  great  similarity  between  them.  Both  laws  recog- 
nize the  difference  between  a  partnership  and  a  community  of  interest,  and 
provide  that  no  new  partner  can  be  introduced  without  the  concurrence  of 
the  original  partners.  But  the  Common  law  has  refused  to  follow  the 
Roman  law  in  holding  invalid  an  agreement  that  the  personal  representa- 
tive of  a  partner  should  succeed  him  in  the  partnership.  Both  laws  require 
a  partnership  to  be  in  good  faith  and  for  a  lawful  purpose;  and  that  all 
partners  must  contribute  something,  whether  property  or  skill,  to  the  com- 
mon stock.  Both  require  community  in  profits  among  the  partners  and,  to 
a  more  limited  extent,  community  in  losses.  In  the  absence  of  express 
agreement  both  laws  require  an  equal  division  of  profits.  The  Common  law 
formerly  went  beyond  the  Roman  law  in  making  persons  who  share  the 
profits  of  a  trade  liable  by  operation  of  law  to  third  persons  as  partners, 
but  this  rule  was  overthrown  in  Cox  v.  Hickman.2  Both  laws  recognize  a 
division  into  universal,  general,  and  special  partnerships,  though  the  chief 
Common  law  division  is  into  public  and  private  partnerships.3  Both  regu- 
late the  duration  of  the  partnership  by  the  consent  of  the  partners,  but  the 
Roman  law  went  further  than  the  English,  and  prohibited  partnerships 
extending  beyond  the  life  of  the  parties.  No  particular  forms  for  the  con- 
stitution of  a  partnership  were  required  by  either  law.  By1  the  Roman  law, 
the  mere  partnership  relation  conferred  less  extensive  powers  of  disposition 
of  the  partnership  property  than  are  given  by  the  Common  law.  A  Roman 
partner  could  not  bind  the  firm  by  debts,  nor  alienate  more  than  his  share 

1  The  Influence  of  the  Roman  Law  merchant, ' '    see    §  1,    of    Professor 

on  the  Law  6f  England,  by  Thomas  Melville  M.  Bigelow  's  book  on  Bills, 

Edward  Scrutton,   Select  Essays  in  Notes  and  Cheques,  (2d  ed.) 

Anglo-American  Legal  History,  vol.  2  See  post,  §  88-90. 

1,  p.  220.  8  But  see  as  to  this  classification, 

For  a  further  account  of  the  ' '  law  post,  §  3. 

xxii 


INTRODUCTION 

of  the  partnership  property.  But  in  the  absence  of  express  stipulation,  and 
with  some  limitations,  each  partner  of  an  English  partnership  may  be 
taken,  by  outsiders,  as  having  an  equal  and  complete  power  of  administra- 
tion over  the  whole  of  the  partnership  affairs.  Both  laws  admit  a  discharge 
of  a  debt  to  or  by  one  partner  to  be  good  for  or  against  the  whole  firm. 
In  the  Common  law,  within  the  scope  of  the  partnership,  the  majority  have 
a  right  to  govern,  but  in  the  Roman  law  the  express  or  implied  assent  of 
all  the  partners  is  required.  Both  laws  make  partners  liable  to  each  other 
for  negligence  or  fraud,  and  require  a  withdrawal  from  the  partnership  to 
be  in  good  faith.  Both  laws  consider  a  partnership  for  no  certain  period 
as  dissoluble  at  the  will  of  any  partner;  but  the  Eoman  law  went  further 
than  the  Common  law  in  requiring  that  the  dissolution  should  not  take 
place  at  an  unseasonable  time.  Both  laws  allow  the  court  to  dissolve  the 
partnership  in  case  of  positive  or  meditated  abuse  of  it  by  a  partner,  or 
when  its  objects  are  no  longer  attainable,  as  in  the  case  of  a  partner's 
insanity.  By  both  laws,  the  assignment  of  his  interest  by  one  partner, 
contrary  to  the  will  of  the  others,  dissolves  the  partnership.  Both  laws 
dissolve  the  partnership  by  death;  and  many  of  the  provisions  in  both  laws 
for  taking  an  account  and  winding  up  a  partnership  are  similar,  though 
the  English  sale  is  more  convenient  than  the  Roman  division.  Whilst 
English  partners  are  liable  to  third  parties  in  solido,  by  the  Roman  law 
they  were  only  liable  pro  parte. 

"This  enumeration  shows  a  sufficient  agreement  between  the  two  systems 
to  justify  the  assertion  that  while  the  method  of  the  introduction  of  so 
much  Roman  law  in  early  times  is  not  clear,  in  later  times  most  of  its  lead- 
ing principles  have  become  incorporated  into  the  Common  law  of  Partner- 
ship." 

Perhaps  one  further  quotation  may  be  justified : 

"During  the  Middle  Ages,"  says  Mr.  Mitchell,*  "contracts  of  partner- 
ship were  common,  and  at  their  close  companies  with  freely  alienable  shares 
had  come  into  existence.  In  the  early  centuries  the  most  common  form  of 
partnership  was  the  'commenda.'  This  was  a  partnership  in  which  one  of 
the  parties  supplied  the  capital,  either  in  the  shape  of  money  or  goods, 
without  personally  taking  an  active  part  in  the  operations  of  the  society, 
while  the  other  party  supplied  none  or  only  a  smaller  fraction  or  the  capital 
and  conducted  the  actual  trade  of  the  association.  This  form  of  partner- 
ship was  especially  used  in  maritime  trade  and  was  often  confined  to  single 
ventures.  Its  popularity  was  due  to  the  fact  that  it  enabled  the  capitalist 
to  turn  his  money  to  good  account,  without  violating  the  canonical  laws 

4  Early  Forms  of  Partnership,  by  Anglo-American  Legal  History,  vol. 
William  Mitchell,  Select  Essays  in  3,  p.  183. 

xxiii 


INTRODUCTION 

against  usury,  and  enabled  the  small  merchant  or  shipper  to  secure  credit 
and  to  transfer  the  risk  of  the  venture  to  the  capitalist.  *  *  * 

"But  side  by  side  with  the  commenda  there  existed  throughout  the 
Middle  Ages  a  closer  kind  of  partnership  in  which  the  partners  were  nor- 
mally coordinate  members  of  the  association  with  the  same  privileges  and 
responsibilities.  The  usual  expression  for  this  type  of  society  was  '  com- 
pagnia'  or  'sooietas,'  and  the  firm  was  generally  designated  by  the  name  of 
one  of  ite  members  with  the  addition  of  the  phrase  '  et  socti, '  or  the  like.  It 
became  an  essential  feature  of  this  form  of  partnership  that  the  partners 
were  all  of  them  responsible  individually  for  the  debts  of  the  firm.  At  no 
time  in  Italy  was  the  power  of  partners  to  bind  by  contract  their  fellow 
partners  in  practice  denied.  •  *  *  *  But  though  a  single  partner  could 
thus  represent  the  firm,  originally  it  was,  as  a  rule,  only  in  virtue  of  special 
procuration  that  he  was  privileged  so  to  do.  In  the  medieval  contracts 
of  partnership  the  partners  often  gave  one  another  by  procuration  the 
right  to  represent  and  bind  the  firm.  In  the  absence  of  such  clauses  in 
the  contract,  creditors  of  the  firm  for  a  debt  contracted  by  an  individual 
partner  could  in  some  places  only  make  good  their  claim  against  the  firm 
as  a  whole,  if  the  debt  had  been  recognized  as  a  debt  of  the  firm,  as  by 
entry  in  the  firm's  book,  or  employment  of  the  money  or  goods  for  the 
common  purposes  of  the  firm.  Simply  in  his  capacity  as  partner  a  merchant 
had  not  everywhere  in  the  early  centuries  of  the  Middle  Ages  a  right  to 
bind  his  copartners.  *  *  * 

"A  third  type  of  partnership,  that  of  joint  stock  companies  with  the 
capital  in  the  shape  of  freely  alienable  shares,  with  a  liability  limited  to 
the  amount  of  capital  represented  by  the  share,  and  with  an  administrative 
governing  body  composed  of  shareholders  in  which  the  majority  decided, 
was  in  process  of  formation  during  the  Middle  Ages.  *  '*  *  It  was  in 
Genoa  that  the  first  joint  stock  companies  arose.  *  *  *  It  would  seem 
that  joint-stock  companies  took  their  rise  owing  to  colonial  expansion  in 
Italy  at  the  close  of  the  Middle  Ages,  and  had  spread  to  Holland,  France 
and  England  by  the  17th  century." 

Bibliographical. — Partnership  has  been  treated  by  many 
writers — among  English  writers  by  Archbold,  Bisset,  Collyer, 
Dixon,  Fo*x,  Gow,  Lindley,  Pollock,  Stark,  and  Watson;  and 
among  American  writers  by  Bates,  Parsons  (Theophilus),  Par- 
sons (James),  Rowley,  and  Story.  There  have  been  several 
American  editions  of  Lindley. 

Of  books  primarily  for  students,  there  are  those  of  Professor 
Burdick,  Professor  Gilmore,  Mr.  Shumaker,  and  others.  Of  cases 
for  the  use  of  students,  there  are,  among  several,  collections 

xxiv 


INTRODUCTION 

by  Professors  Ames,  Burdick,  Gilmore,  and  Mechem,  respectively 
References  to  these  collections  will  be  found  in  the  notes  in  this 
book. 

(The  references  to  Mechem 's  cases  are  to  the  third  edition.) 

The  subject  of  Limited  Partnership  has  also  been  treated  by 
Mr.  Bates,  in  a  separate  volume. 

Codification. — In  England,  since  1890,  and  in  several  of  our 
States  the  law  of  partnership  has  been,  to  a  greater  or  less  ex- 
tent, reduced  to  the  form  of  a  statute.  Thus  there  are  the  Field 
Code  in  California  and  some  other  western  states;  the  Georgia 
Code;  and  the  Louisiana  Code.  The  most  important  of  all 
American  statutes  upon  the  subject,  however,  is  now  the  Uni- 
form Partnership  Act,  drafted  by  Professor  William  Draper 
Lewis  of  the  University  of  Pennsylvania,  under  the  auspices 
of  the  National  Conference  of  Commissioners  on  Uniform  State 
Laws,  and  by  them  recommended  to  the  several  States  for  adop- 
tion. After  long  deliberation,  in  the  course  of  which  Professor 
James  Barr  Ames  prepared  a  draft  upon  the  so-called  "entity 
theory, ' '  the  Commissioners  decided  to  proceed  upon  the  opposite 
or  so-called  common  law  or  aggregate  theory. 

The  Act  as  drafted  does  not  purport  to  be  a  complete  body  of 
Partnership  law,  but  leaves  many  points  untouched  and,  hence, 
as  they  were  at  common  law.5  It  has  already  been  adopted  in  a 
number  of  states.  While,  of  course,  it  has  no  legal  force  except 
where  it  is  so  adopted,  it  is  important  and  interesting  everywhere 
as  an  approved  statement  of  the  law.  A  Uniform  Limited  Part- 
nership Act  has  also  been  prepared  in  the  same  way.  These 
Uniform  Acts  will  be  found  in  the  Appendix,  and  the  provisions 
of  the  Uniform  Partnership  Act  are  constantly  referred  to  in 

5  Sec.  4,  provides:     "  (1)  the  rule  general  purpose  to  make  uniform  the 
that   statutes  in  derogation   of   the  law  of  those  states  which  enact  it. 
common  law  are  to  be  strictly  con-  (5)    [Shall  not  affect  existing  con- 
strued, shall  have  no  application  to  tracts,  rights  or  actions]." 
this  act;    (2)    The  law  of  estoppel  "Sec.    5.     In  any   case   not  pro- 
shall  apply  under  this  act;   (3)  The  vided   for  in  this  act  the  rules  of 
law  of  agency  shall  apply  under  this  law   and   equity,   including   the   law 
act;    (4)   This  act  shall  be  so  inter-  merchant,  shall  govern." 
preted  and  construed  as  to  effect  its 

XXV 


INTRODUCTION 

the  text  which  follows.    Eeferences  to  some  of  the  current  com- 
ments on  the  Act  will  be  found  in  the  foot  note.6 


8  There  are  explanatory  articles 
by  Professor  Lewis,  in  24  Yale  Law 
Journal,  617;  by  Professor  Willis- 
ton,  in  63  University  of  Pennsyl- 
vania Law  Eeview,  196;  by  Mr. 
James  B.  Lichtenberger,  id.,  639;  by 
Professor  Moore,  in  18  Columbia 
Law  Eeview,  582,  (this  gives  a  very 
complete  history  of  the  preparation 
of  the  act) ;  criticisms  by  Mr.  Jud- 
son  A.  Crane,  in  28  Harvard  Law 
Review,  762;  a  reply  by  Professor 
Lewis,  in  29  Harvard  Law  Eeview, 


158,  291;  a  rejoinder  by  Mr.  Crane, 
id.,  838;  an  historical  review  of  the 
entity  theory  by  Professor  Drake,  in 
15  Michigan  Law  Eeview,  609;  and 
a  discussion  of  the  general  advisabil- 
ity of  a  Partnership  Act  by  Pro- 
fessor Lewis,  in  60  University  of 
Pennsylvania  Law  Eeview,  93.  Pro- 
fessor Lewis  has  also  appended  to 
the  printed  copies  of  the  act  elabo- 
rate notes  as  to  the  purpose  and 
effect  of  the  several  sections. 


XXVI 


THE  LAW  OF  PARTNERSHIP 


CHAPTER  I. 

DEFINITIONS  AND  DISTINCTIONS. 


:    1.  Partnership  defined. 

2.  The      characteristic      ele- 
ments. 

3.  Partnership   a  commercial   as- 

sociation. 

4.  Is  a  contractual  relation. 

5.  Is   a  voluntary   relation — The 

delectus  personarum. 

6.  Is    a    partnership    a    distinct 

entity? 

7.  The    commercial    concep- 
tion of  partnership. 

8.  How     a     partnership     differs 

from  a  corporation. 

9.  Intermediate    associations. 
10.  Clubs,    societies,    etc. 

11, 12.  Joint-tenancy    and    co-own- 
ership. 

13.  Joint     purchasers     of     goods, 

etc.,  for  division,  use,  etc. 

14.  Joint  purchasers  of  goods,  etc., 

for  resale. 

15.  Workmen   dividing  product  or 

proceeds. 

16.  Joint  ventures — Syndicates. 


§  17-19.  Members  of  defectively  or- 
ganized corporations. 

20-23.  Causes    of    failure    to 

incorporate. 
24,  25.  Effect  of  estoppel. 

26.  The  doctrine  of  contract- 
ual limitation. 

27.  The  doctrine  that  no  one 

but  the  State  may  raise  the 
question. 

28.  Eights     as     partners     in 

such  cases. 

29.  Promoters  of  companies. 

30.  31.  Contemplated  partnerships. 
32, 33.  Classification     of     partner- 
ships. 

34-39.  Peculiar       forms       of 

partnership — Joint  stock 
companies — Partnership  as- 
sociations— Mining  partner- 
ships— Limited  partnerships 
— Sub-partnerships. 

40.  Trust  or  partnership. 

41.  Classification  of  partners. 


§1.  Partnership  defined. — Partnership  may  be  tentatively 
defined  as  a  legal  relation,  based  upon  the  express  or  implied 
agreement  of  two  or  more  competent  persons  whereby  they  unite 
their  property,  labor  or  skill  in  carrying  on  some  lawful  busi- 
ness as  principals  for  their  joint  profit.  The  English  Partner- 
Mech.  Part. — 1  \ 


§  1]  LAW  OF  PARTNERSHIP 

ship  Act  declares  that  ''Partnership  is  the  relation  which  sub- 
sists between  persons  carrying  on  a  business  in  common  with  a 
view  of  profit."  The  American  Uniform  Partnership  Act  pro- 
vides that  "A  partnership  is  an  association  of  two  or  more 
persons  to  carry  on  as  co-owners  a  business  for  profit."  The 
persons  so  united  are  called  partners.  The  term  copartnership 
is  sometimes  used  to  designate  the  relation,  and  the  term  co- 
partners to  designate  the  parties.  The  partners  collectively  are 
often  called  the  firm,1  though  in  the  older  cases  especially  the 
word  firm  is  used  to  designate  the  name  under  which  the  busi- 
ness is  conducted.2 

An  attempt  to  frame  a  satisfactory  definition  of  partnership 
is  probably  a  somewhat  hazardous  undertaking.  This  is  partly 
owing  to  the  difficulty  inhering  in  any  attempt  at  definition, 
but  it  is  chiefly  attributable  to  the  fact  that  the  legal  concep- 
tion of  partnership  has  not  always  been,  nor  is  it  wholly  yet, 
clear  and  definite,  and  that  the  legal  test  for  determining  the 
existence  of  the  relation  has  varied  from  time  to  time.  Mr. 
Justice  Lindley,  in  his  admirable  treatise  upon  the  subject,3 
declines  to  attempt  a  definition,  saying  that  to  frame  one  ' l  which 

l"The  word  'firm'  is  a  short,  14  Ch.  D.  122,  126,  C.  A.)  In  Scot- 
collective  name  for  the  individuals  land  a  firm  is  a  legal  person  distinct 
who  constitute  the  partners,  and  the  from  the  partners  of  which  it  is 
name  under  which  they  trade  is  composed.  Partnership  Act,  1890, 
their  firm  name.  (Partnership  Act,  sec.  4  (2)."  Halsbury,  Laws  of 
1890.  Sec.  4;  the  firm  name  is  a  England,  22,  p.  5.  It  is  in  this  sense 
mere  expression,  not  a  legal  entity,  that  the  word  firm  is  used  in  this 
Sadler  v.  Whiteman  [1910],  1  K.  B.  book. 

868,  per  Farwell,  L.  J.,  at  p.  889,  The  partnership  is  also  frequently 

cited  with  approval.     E.  v.  Holden  called  the  "house,"  or  the  "con- 

[1912],  1  K.  B.  483,  C.  C.  A.)     It  is  cern." 

not  the  name  of  a  corporation ;  it  is  2  According    to     the    dictionaries 

a  short  name  for  X,  Y  and  Z  carry-  this  is  an  entirely  proper  use  of  the 

ing  on  business  in  partnership.     (Be  word  firm,  t.  e.,  as  synonymous  wi,th 

Smith,  Fleming  &  Co.  (1879),  12  Ch.  name  or  style.     See,  also,  McCosker 

Div.  557,  567,  C.  A.)     In  English  v.  Banks  (1896),  84  Md.  292,  35  Atl. 

law,  a  firm  is  not  a  persona.     (Re  935;   In  re  Klein's  Estate    (1907), 

Saweru  (1879),  12  Ch.  Div.  522,  C.  35  Mont.  185,  88  Pac.  798;  People  v. 

A.,  per  James,  L.  J.,  at  p.  533;  Ee  Strauss  (1901),  97  111.  App.  47,  55. 

Vagliano  Collieries  (1910),  79  L.  J.  8  Lindley  on  Partnership  (Ewell's 

Ch.  769;  compare  Ee  Shand  (1880),  ed.),  vol.  I,  p.  1. 


DEFINITIONS  AND  DISTINCTIONS 


[§2 


shall  be  both  positively  and  negatively  accurate  is  possible  only 
to  those  who,  having  legislative  authority,  can  adapt  the  law 
to  their  own  definition."  He  collects,  however,  no  fewer  than 
nineteen  definitions  which  have  been  given  by  other  writers; 
and  some  of  the  most  important  of  these  are  reproduced  in  the 
foot-note.4 

§2.  Same  subject — The  characteristic  elements. — These  sev- 
eral definitions  vary  in  minor  particulars,  but  from  them  all 
at  least  the  characteristic  elements  of  partnership  may  be  gath- 
ered. Thus — 

1.  It  is  an  unincorporated  association  or  legal  relation. 

2.  It  is  created  not  by  law  but  by  the  agreement  of  the  parties. 

3.  It  requires  two  or  more  competent  parties. 

4.  It  involves  ordinarily  the  contribution  by  the  members  of 
money,  property,  skill,  labor,  credit,  or  the  like,  to  constitute 


4 "  A  partnership  is  the  contract 
relation  subsisting  between  persons 
who  have  combined  their  property, 
labor  or  skill  in  an  enterprise  or 
business  as  principals  for  the  pur- 
pose of  joint  profit." — Bates. 

"Partnership,  as  between  the 
parties  themselves,  is  a  voluntary 
contract  between  two  or  more  per- 
sons for  joining  together  their 
money,  goods,  labor  and  skill,  or 
any  or  all  of  them,  under  an  under- 
standing that  there  shall  be  a  com- 
munion of  profit  between  them,  and 
for  the  purpose  of  carrying  on  a 
legal  trade,  business  or  adventure." 
— Collyer. 

"Partnership,  often  called  copart- 
nership, is  usually  defined  to  be  a 
voluntary  contract  between  two  or 
more  competent  persons  to  place 
their  money,  effects,  labor  and  skill, 
or  some  or  all  of  them,  in  lawful 
commerce  or  business,  with  the 
understanding  that  there  shall  be 


a  communion  of  the  profits  thereof 
between  them." — Story. 

"We  define  partnership  as  the 
combination  by  two  or  more  persons 
of  capital,  or  labor,  or  skill,  for  the 
purpose  of  business  for  their  com- 
mon benefit. ' ' — Parsons. 

The  latest  editor  of  Mr.  Parsons' 
book,  Professor  Beale,  substitutes 
the  following:  "Partnership  is  a 
legal  entity  formed  by  the  associa- 
tion of  two  or  more  persons  for  the 
purpose  of  carrying  on  business  to- 
gether and  dividing  its  profits  be- 
tween them." 

See,  also,  the  remarks  of  Sir 
George  Jessel,  M.  E.,  in  Pooley  v. 
Driver  (1876),  Law  Eeports,  5  Ch. 
Div.  458,  Ames*  Cases  87;  and  the 
case  of  Queen  v.  Eobson  (1885),  16 
Q.  B.  Div.  137,  Mechem's  Cases  1; 
Gilmore's  Cases  85. 

In  popular  parlance  the  word 
partner,  or  the  colloquial  "pard- 
ner, "  is  frequently  very  loosely 
used. 


§  3]  LAW  OP  PARTNERSHIP 

the  capital,  stock,  or  foundation  of  the  business.  In  the  case  of 
commercial  partnership  the  contributions  will  usually  be  in 
property,  money  or  credit;  in  industrial  partnerships  labor  or 
service  will  usually  be  the  contribution;  .while  in  professional 
partnership  professional  skill,  standing  or  reputation  may  be 
the  chief  ingredient.  As  will  be  seen  hereafter,8  the  several  con- 
tributions need  not  all  be  of  the  same  kind  nor  of  the  same 
amount  or  value.  Though  usual  and  often  said  to  be  essential, 
it  seems  not  to  be  indispensable  that  every  partner  shall  make 
a  contribution.6 

5.  It  contemplates  the  transaction  of  some  lawful  business, 
trade  or  occupation,  in  which  the  parties  are  to  be  co-owners 
and  which  they  are  to  carry  on  as  principals. 

6.  The  purpose  of  the  union  is  the  pecuniary  gain  of  the 
members. 

In  several  of  the  definitions,  partnership  is  spoken  of  as  a 
contract.  It  is,  however,  rather  the  result  of  the  contract  than 
the  contract  itself;  it  is  the  relation  or  association  which  the 
contract  creates. 

§3.  Partnership  a  commercial  association. — Partnership  in 
our  modern  English  law  is  distinctively  a  business  relation, 
and  its  object  is  the  pecuniary  gain  of  the  members.  This  fact 
sharply  differentiates  it  from  a  large  class  of  associations  or- 
ganized for  social,  charitable,  educational,  religious  or  other 
similar  purposes,  such  as  social  clubs,  committees,  lodges,  fra- 
ternal societies,  Christian  associations,  granges,  and  the  like,  of 
which  something  more  will  be  said  in  a  later  section.7 

6  See  post,   §  136.  relative  of  some  former  partner,  who 

6  Thus  it  is  said  by  Jessel,  M.  R.,  contributes  nothing  at  all, — neither 

in  Pooley  v.  Driver   (1876),  5   Ch.  name,  nor  skill,  nor  anything  else. 

Div.  458,  Ames'  Gas.  87,  "You  can  Therefore  it  is  not  quite  accurate, 

have,  undoubtedly,  according  to  Eng-  as  Chancellor  Kent  puts  it,  that  they 

lish  law,  a  dormant  partner  who  puts  must     contribute     labor,     skill     or 

nothing     in, — neither     capital,     nor  money,  or  some  or  all  of  them." 

skill,   nor  anything   else.     In   fact,  7  An    association    organized,    not 

those  who  are  familiar  with  partner-  for  gain,  but  for  the  accomplishment 

ships  know  it  is  by  no  means  uncom-  of  some  social  or  religious  purpose, 

mon  to  give  a  share  to  the  widow  or  as,    for    example,    a   Young   Men's 


DEFINITIONS  AND   DISTINCTIONS 


In  continental  law  the  term  partnership  has  often  been  ap- 
plied more  widely,  including  various  forms  of  communal  asso- 


Christian  Association,  is  not  a  part- 
nership. Queen  v.  Kobson  (1885), 
16  Q.  B.  Div.  137,  Mechem's  Part- 
nership Cases,  1,  Gilmore's  Partn. 
Gas.  85.  See,  also,  §  10,  post. 

Neither  is  a  temporary  mutual 
protective  association:  Burt  v.  La- 
throp  (1883),  52  Mich.  106,  17  N. 
W.  716,  Mechem's  Partn.  Cas.  4; 
Gilmore's  Partn.  Cas.  57;  nor  a 
Masonic  lodge:  Ash  v.  Guie 
(1881),  97  Pa.  493,  39  Am.  Eep. 
818,  Mechem's  Partn.  Cas.  721; 
Burdick's  Partn.  Cas.  30;  or  an  as- 
sociation of  "Knights  of  Labor": 
Brown  v.  Stoerkel  (1889),  74  Mich. 
269,  41  N.  W.  921,  3  L.  R.  A.  430; 
nor  a  "provisional  committee" 
organized  to  promote  the  formation 
of  a  railway  company:  Batard  v. 
Hawes  (1852),  2  El.  &  Bl.  287,  Bur- 
dick's Partn.  Cas.  33;  nor  a 
"grange":  Edgerly  v.  Gardner 
(1879),  9  Neb.  130,  1  N.  W.  1004; 
nor  a  rural  telephone  association: 
Meinhart  v.  Draper  (1908),  133  Mo. 
App.  50,  112  S.  W.  709;  nor  a  relig- 
ious communistic  society,  Teed  v. 
Parsons  (1903),  202  111.  455,  66  N. 
E.  1044.  An  association  of  pilots 
who  prescribe  rules  regulating  the 
order  in  which  pilots  shall  serve,  and 
who  pool  and  divide  the  fees  earned 
by  each,  is  not  a  partnership.  Guy  v. 
Donald  (1906),  203  U.  S.  399,  51  L. 
ed.  245,  27  S.  Ct.  63.  An  athletic 
association  organized  merely  to  pro- 
mote athletic  exercises  by  its  mem- 
bers would  not  be  a  partnership,  but 
if  organized  to  give  athletic  or  sport- 
ing exercises  or  games  as  a  business 
for  the  profit  of  its  members,  it 
would  be:  Bennett  v.  Lathrop 


(1889),  71  Conn.  613,  42  AtL  634, 
71  Am.  St.  JR.  222,  Mechem's  Partn. 
Cas.  *  723.  So  may  be  an  associa- 
tion of  fruit  growers  organized  to 
market  the  products  of  its  members 
and  engaged  in  the  business  of  sell- 
ing fruit,  Briere  v.  Taylor  (1905), 
126  Wis.  347,  105  N.  W.  817. 

For  similar  reasons  a  defectively 
organized  corporation  will  not  be 
treated  as  a  partnership  if  it  was 
not  organized  for  the  purpose  of 
carrying  on  a  business  for  profit. 
Johnson  v.  Corser  (1885),  34  Minn. 
355,  25  N.  W.  799. 

An  association  merely  to  adjust, 
prevent  or  distribute  the  losses  of  a 
business  would  not  be  a  partnership. 
Aigen  v.  Boston,  etc.,  B.  B.  Co. 
(1882),  132  Mass.  423;  Irvin  v. 
Nashville,  etc.,  R.  Co.  (1879),  92  111. 
103,  34  Am.  Rep.  116. 

Mutual  housekeeping  arrangement 
not  a  partnership.  Austin  v.  Thom- 
son (1863),  45  N.  H.  113. 

Co-operative  Business  or  Trading 
Associations.  On  the  other  hand,  a 
co-operative  association  organized 
to  carry  on  business  for  gain,  would 
be  a  partnership — often  a  large  one. 
If  it  were  organized  merely  to  save 
money,  e.  g.,  to  buy  goods  at  whole- 
sale and  divide  them  among  the 
members,  it  would  not  be  a  part- 
nership. See  §  13.  But  if  organ- 
ized to  buy  and  sell  goods  for  the 
profit  of  the  members,  it  would  be 
a  partnership,  even  though  lower 
prices  were  given  to  members  than 
to  non-members.  Such  partnerships 
are  often  organized  with  officers  or 
managers  to  conduct  the  business, 
much  like  corporations.  See  Laney 


§4] 


LAW  OF  PARTNERSHIP 


elation  which  would  not  be  deemed  partnerships  with  us.8  Thus, 
a  classification  into  civil  and  commercial  partnerships  is  not  in- 
frequently found. 

Judge  Story,  writing  in  1841,  and  following  Watson  and 
Collyer,  though  with  less  precision,  says  that  at  common  law 
partnerships  are  sometimes  divided  into  two  classes:  (1)  Pri- 
vate partnerships  and  (2)  Public  companies,9  the  latter  of  which 
are  divided  into  incorporated  and  unincorporated,  and  are  made 
to  include  several  forms  of  association  which  would  not  now 
be  regarded  as  partnerships  at  all. 

§4.  Is  a  contractual  relation. — Partnership  is  a  contractual 
relation  and  not  a  status.10  It  is  created,  limited,  regulated  and 
terminated,  as  between  the  parties  themselves,  by  their  contract 
or  agreement.  The  law  does  not  create  partnership,  or  arbi- 
trarily presume  its  existence.11  As  has  been  seen  in  the  study  of 
agency,12  authority  in  one  person  to  bind  another  as  his  agent 


v.  Fickel  (1899),  83  Mo.  App.  60, 
Mechem's  Gas.  83;  Atkins  v.  Hunt 
(1843),  14  N.  H.  205,  Mechem's 
Cas.  79;  McFadden  v.  Leeka  (1891), 
48  Ohio  St.  513,  28  N.  E.  874, 
Mechem's  Cas.  280;  Carter  v.  Mc- 
Clure  (1896),  98  Tenn.  109,  38  S. 
W.  585,  60  Am.  St.  B.  842,  36  L. 
B.  A.  282,  Burd.  Cas.  37,  Gilm.  Cas. 
108;  Davison  v.  Holden  (1887),  55 
Conn.  103,  10  Atl.  515,  3  Am.  St. 
R,  40;  Farnum  v.  Patch  (1880),  60 
N.  H.  294,  49  Am.  Rep.  313;  Hodg- 
son v.  Baldwin  (1872),  65  111.  532; 
Schumacher  v.  Sumner  Telephone 
Co.  (1913),  161  Iowa  326,  142  N.  W. 
1034.  Compare  McDonald  v.  Flem- 
ing (1913),  178  Mich.  206,  144  N. 
W.  519.  See  also  Joint  Stock  Com- 
panies, post,  §  35. 

8  See,  for  example,  Maine  'a  Vil- 
lage Communities. 

9  Story  on  Partnership,  §  76. 

10  Bates    on    Partnership,    vol.    I, 
§  2.    Mr.  James  Parsons,  in  his  work 


on  the  Principles  of  Partnership 
(Boston,  1889),  §  101,  does  indeed 
declare  the  contrary,  distinguishing 
in  this  respect  agency  and  partner- 
ship. Agency,  he  asserts,  is  not  a 
status  but  a  contractual  relation, 
while  partnership  is  the  reverse. 
This  is  quoted,  apparently  with  ap- 
proval, in  Haggett  v.  Hurley  (1898), 
91  Me.  542,  40  Atl.  561,  41  L.  E.  A. 
362.  It  is  believed,  however,  that 
the  two  relations  are  alike  contrac- 
tual. See  Holland's  Jurisprudence, 
(10th  ed.),  136. 

11  Phillips  v.  Phillips  (1863),  49 
111.  437,  Gilm.  Cas.  113;  Be  Gibbs' 
Estate  (1893),  157  Pa.  59,  27  Atl. 
383,  22  L.  E.  A.  276,  Gilm.  Cas.  91; 
Wilson  v.  Cobb  (1877),  28  N.  J.  Eq. 
177  (29  N.  J.  Eq.  361).  Compare 
Phillips  v.  Phillips,  supra,  with  Rat- 
zer  v.  Ratzer  (1877),  28  N.  J.  Eq. 
136. 

12Mechem  on  Agency  (2d  ed.), 
§29. 


DEFINITIONS  AND  DISTINCTIONS  [§  5 

is  sometimes  said  to  be  created  by  law  or  by  necessity  ;  but  this 
is  not  true  in  the  law  of  partnership.  One  individual  may,  it  is 
true,  be  held  liable,  by  estoppel,  to  particular  persons  as  though 
he  were  a  partner,  but  this  liability,  as  will  be  seen  hereafter,13 
is  limited  to  those  only  in  whose  favor  the  estoppel  operates,  and 
does  not  make  such  individual  an  actual  partner,  nor  amount  to 
the  general  creation  of  a  partnership  between  him  and  those 
with  whom  he  was  reputed  to  be  associated.  As  a  general  rule 
there  can  be  no  partnership  where  the  parties  have  not  by  their 
agreement  created  one. 

A  present  partnership  may  be  formed  by  the  immediate  act 
of  the^  parties  without  any  preliminary  contract  to  do  so.  There 
may  also  be  a  present  contract  to  form  a  partnership  at  some 
future  time. 

Contracts  to  enter  into  partnership  rest  upon  the  same  foun- 
dations, such  as  consideration,14  competency  of  parties,  and  the 
like,  as  other  contracts. 

Contracts  of  partnership  need  not  be  express:  they  may  be 
implied  from  words  or  conduct  as  in  other  cases.15 

§  5.  Is  a  voluntary  relation  —  The  delectus  personarum.  —  It 

is  necessary  also  to  emphasize  the  voluntary  character  of  the 
relation.  The  law  does  not  choose  partners  for  people.  So 
intimate  and  confidential  is  the  relation,  so  important  and  dan- 
gerous, if  abused,  are  the  powers  of  one  partner  to  subject  the 
others  to  liability,  that  the  law  leaves  the  choice  of  partners 
to  the  parties  themselves,  and  does  not  attempt  to  force  a  part- 
ner upon  another  without  the  latter  's  consent.  This  right  to 
choose  one's  own  partner  —  the  delectus  personarum,  as  it  is  often 
called  —  is  properly  regarded  as  one  of  the  most  important  char- 
acteristics of  partnership.16 


103.  15  See  Davis  v.   Davis    [1894],   1 

14  There    must    be    consideration.      Oh.  393,  Burdick's  Partn.   Gas.  12. 
Mitchell  v.  O'Neale  (1869),  4  Nev.          16  See  post,  §57. 
504;  though  the  mutual  promises  of 
the  parties  will  suffice   as  in  other 
cases. 


§  6]  LAW  OF  PARTNERSHIP 

§6.  Is  a  partnership  a  distinct  entity? — A  partnership  is 
sometimes  said  to  be  a  distinct  entity  or  legal  person  separate 
and  distinct  from  the  persons  composing  it  as  in  the  case  of 
the  corporation,  but  from  a  legal  standpoint  this  can  be  true 
only  in  a  limited  sense.17  For  most  purposes  the  common  law 


17  This  is  partly  a  question  of 
definition.  The  word  entity  is  used 
in  more  than  one  sense.  In  the  sense 
that  a  partnership  is  a  distinct 
group  of  persons,  whose  legal  rights, 
powers,  duties,  liabilities  and  dis- 
abilities are  affected  by  the  fact  that 
they  stand  in  that  relation,  a  part- 
nership is  an  entity.  But  in  the 
sense  that  the  partnership  is  a  sepa- 
rate legal  person  having  rights  and 
liabilities  of  its  own,  distinct  from 
those  of  all  or  any  of  the  partners,  a 
partnership  is  not,  according  to  the 
generally  prevailing  view  of  English 
law,  a  distinct  legal  entity.  "The 
law  of  England,"  says  Sir  Fred- 
erick Pollock,  "knows  nothing  of 
the  firm  as  a  body  or  artificial  per- 
son distinct  from  the  members  com- 
posing it,  though  the  firm  is  so  treat- 
ed by  the  universal  practice  of  mer- 
chants and  by  the  law  of  Scotland. 
In  England  the  firm  name  may  be 
used  in  legal  instruments  both  by  the 
partners  themselves  and  by  other 
persons  as  a  collective  description  of 
the  persons  who  are  partners  in  the 
firm  at  the  time  to  which  the  descrip- 
tion refers,  and  under  the  rules  of 
the  supreme  court  actions  may  now 
be  brought  by  and  against  partners 
in  the  name  of  their  firm.  An  ac- 
tion between  a  partner  and  the  firm, 
or  between  two  firms  having  a  com- 
mon member,  was  impossible  at 
common  law,  and  until  1891  it  re- 
mained open  to  doubt  whether  such 
actions  were  possible  since  the  judi- 


cature acts;  but  they  are  now  ex- 
pressly authorized  by  the  rules  of 
court.  Nevertheless,  the  general 
doctrine  that  'there  is  no  such 
thing  as  a  firm  known  to  the  law' 
remains  in  force."  Digest  of  Law 
of  Partnership  (8th  ed.),  p.  23. 

In  Drucker  v.  Wellhouse  (1888), 
82  Ga.  129,  8  S.  E.  40,  2  L.  E.  A. 
328,  it  is  said  that,  while  a  partner- 
ship is  not  a  person  it  is  an  entity. 

Persons  are  commonly  classified 
as  either  natural,  i.  e.  human  beings, 
or  artificial.  "  'Artificial',  'con- 
ventional', or  'juristic'  persons," 
says  Mr.  Holland  (Jurisprudence, 
9th  ed.,  p.  91),  "are  such  groups  of 
human  beings  or  masses  of  property 
as  are  in  the  eye  of  the  law  capable 
of  rights  and  liabilities,  in  other 
words  to  which  the  law  gives  a 
status.  Such  groups  are  treated  as 
being  persons,  or  as  sustaining  the 
mask  of  personality.  They  are  of 
two  kinds:  (1)  ' Universitates  per- 
sonarum',  such  as  the  state  itself; 
departments  or  parishes;  collegia; 
churches.  (2)  '  Universitates  ftono- 
rum',  such  as  funds  left  to  'pious 
uses'  without  a  trustee.  *  *  * 
So  the  estate  of  an  intestate  before 
administration;  the  estate  of  a 
bankrupt. 

"Such  juristic  or  artificial  per- 
sons come  into!  being  when — (1) 
there  exists  a  group  of  persons,  or 
mass  of  property,  as  the  case  may 
be,  and  (2)  the  law  gives  to  the 
group  or  mass  in  question  the  char- 


8 


DEFINITIONS  AND  DISTINCTIONS 


[§6 


regards  only  the  individuals  who  occupy  the  relation ;  though  by 
statute  in  many  states  the  partnership  itself  is  regarded  by 


acter  of  a  person.  *  *  *  This 
may  occur  by  means  of  either  (a)  a 
general  rule,  applicable  wherever  its 
conditions  are  satisfied,  e.  g.  'the 
Companies  Act,  1862',  (6)  a  spe- 
cial act  of  sovereign  power,  e.  g.  an 
incorporating  statute  or  charter." 

Professor  Terry,  Anglo-American 
Law,  §  31,  distinguishes  between 
perfect  artificial  persons  and  imper- 
fect ones.  It  is  perfect  when  it  is 
always  treated  as  a  person.  "A 
true  corporation,  for  example,  is 
either  a  person  or  nothing.  An  im- 
perfect artificial  person  is  an  entity 
that  in  law  may  be  taken  in  its  total- 
ity and  in  its  relations  to  the  ex- 
ternal world  in  matters  which  might 
fall  within  the  scope  of  its  person- 
ality as  a  person  for  some  purposes 
but  not  for  all.  Thus,  by  statute,  a 
partnership  may  in  most  places  sue 
and  be  sued  by  its  partnership 
name,  and  the  execution  in  a  judg- 
ment obtained  against  it  in  such  a 
suit  must  be  levied  on  the  partner- 
ship property  only.  But  a  partner- 
ship for  most  purposes  is  not  a  per- 
son. ' ' 

Partnership,  in  English  law  and 
generally  in  our  American  law,  is 
the  natural  persons  who  compose  the 
group,  and  the  group  is  not  an  arti- 
ficial or  juristic  person  made  up 
from  those  natural  persons.  See 
Brown  v.  Hartford  F.  ,  Ins.  Co. 
(1875),  117  Mass.  479,  Gilm.  Cas. 
151;  Haskins  v.  D'Este  (1882),  133 
Mass.  356,  Gilm.  Cas.  154. 

In  a  number  of  foreign  jurisdic- 
tions, partnership  is  declared  by  the 
Code,  or  otherwise  hejd,  to  be  a 
juristic  person. 


Considerable  advocacy  of  this  view 
is  also  to  be  found  in  the  United 
States.  See,  e.  g.,  "The  Firm  as  a 
Legal  Person",  Cowles,  57  Central 
L.  Jour.  343;  "The  Partnership  as 
a  Legal  Entity",  Brannan,  17  Har- 
vard L.  Eeview,  207;  '''The  Uniform 
Partnership  Act",  Crane,  28  Har- 
vard L.  Eeview,  762;  "The  Uni- 
form Partnership  Act  and  Legal 
Persons",  Crane,  29  Harvard  L.  Ee- 
view, 838.  The  draft  for  the  Uni- 
form Partnership  Act  submitted  by 
Professor  Ames  (though  not  finally 
adopted)  was  prepared  upon  this 
theory. 

(But  compare  the  article  by  Pro- 
fessor Drake,  in  15  Michigan  Law 
Eeview  609). 

There  are  many  cases  containing 
dicta  to  the  same  effect.  See,  e.  g. 
Eoop  v.  Herron  (1883),  15  Neb.  73, 
17  N.  W.  353;  Eosenbaum  v.  Hay- 
den  (1888),  22  Neb.  744,  36  N.  W. 
147;  Curtis  v.  Hollingshead  (1834), 
14  N.  J.  L.  402;  Greenwood  v.  Mar- 
vin (1888),  111  N.  Y.  423,  19  N. 
E.  228;  Good  v.  Bed  Eiver  Valley 
Co.  (1904),  12  N.  Mex.  245,  78  Pac. 
46;  Allen  v.  Davids  (1904),  70  S. 
Car.  260,  49  S.  E.  846;  Pierce  v. 
Trigg  (1839),  37  Va.  (10  Leigh) 
423;  Jackson  Bank  v.  Durfey 
(1895),  72  Miss.  971,  18  So.  456, 
31  L.  E.  A.  470,  48  Am.  St.  Eep. 
596,  Meehem's  Gas.  619  ("in 
equity");  Succession  of  Pilcher 
(1887),  39  La.  Ann.  362,  1  So.  929, 
Gilm.  Cas.  148. 

In  Iowa  the  partnership  is  said  to 
be  a  distinct  entity.  See  Fitzgerald 
v.  Grimmell,  supra;  Lansing  v.  Bever 
Land  Co.  (1913),  158  Iowa  693,  138 


§6J 


LAW  OF  PARTNERSHIP 


the  law  as  a  distinct  entity  for  a  few  special  purposes,  as  in  the 
case  of  taxing  acts,  acts  providing  for  the  filing  of  chattel  mort- 
gages, and,  occasionally,  acts  permitting  process  to  run  against 
the  partnership  as  such.18  In  most  other  cases,  when  the  part- 
nership is  spoken  of  as  a  separate,  legal  entity,  having  its  own 
property,  creditors  and  the  like,  little  more  is  meant  as  a  legal 
proposition  than  that  the  partners  as  such  have  special  rights 
and  liabilities  which  are  worked  out  through  their  partnership 
relation.19 


N.  W.  833,  citing  many  other  Iowa 
cases.  So,  in  Louisiana:  Newman 
v.  Eldridge  (1901),  107  La.  315,  31 
So.  688. 

Contra.  "Has  never  been  recog- 
nized" in  Illinois:  Abbott  v.  An- 
derson (1914),  265  III  285,  106  N. 
E.  782,  Ann.  Cas.  1916  A.  741,  L. 
E.  A.  1915  F,  668;  "It  is  not  a  per- 
son, either  natural  or  artificial": 
Adams  v.  Church  (1902),  42  Oreg. 
270,  70  Pac.  1037,  59  L.  E.  A.  782, 
95  Am.  St.  E.  740 ;  "A  partnership 
is  not  like  a  corporation.  It  has  no 
independent  existence."  Matter  of 
Peck  (1912),  206  N.  Y.  55,  99  N.  E. 
258,  31  Ann.  Gas.  798,  41  L.  E.  A. 
(N.  S.)  1223.  "The  inaccuracy  and 
impropriety  of  such  nomenclature 
was  so  clearly  and  repeatedly 
demonstrated  as  to  lead  to  its  sub- 
stantial abandonment":  Loomis  v. 
Wallblom  (1905),  94  Minn.  392,  102 
N.  W.  1114,  69  L.  E.  A.  771,  Gilm. 
Cas.  584. 

18  See  Bicker  v.  American  L.  &  T. 
Co.  (1885),  140  Mass.  346,  5  N.  E. 
284;  Faulkner  v.  Hyman  (1886), 
142  Mass.  53,  6  N.  E.  846;  Hub- 
bardston  Lumber  Co.  v.  Covert 
(1877),  35  Mich.  254,  Gilm.  Cas. 
148;  Williams  v.  Hurley  (1902),  135 
Ala.  319,  33  So.  159;  Eobertson  v. 
Corsett  (1878),  39  Mich.  777;  Fitz- 


gerald v.  Grimmell  (1884),  64  Iowa 
261,  20  N.  W.  179;  Walker  v.  Wait 
(1878),  50  Vt.  668. 

Compare  West  v.  Valley  Bank 
(1856),  6  Ohio  St.  169. 

19  In  Meehan  v.  Valentine  (1891), 
145  II.  S.  611,  12  S.  Ct.  972,  36  L. 
ed.  835;  Mechem's  Cas.  135,  Gilm. 
45,  the  court,  referring  to  the  case 
of  Pooley  v.  Driver  (1876),  L.  E.  5 
Ch.  Div.  458,  Ames'  Cas.  87,  says: 
"In  the  case  last  above  cited  Sir 
George  Jessel  said:  'You  cannot 
grasp  the  notion  of  agency,  properly 
speaking,  unless  you  grasp  the  no- 
tion of  the  existence  of  the  firm  as  a 
separate  entity  from  the  existence 
of  the  partners;  a  notion  which  was 
well  grasped  by  the  old  Eoman  law- 
yers, and  which  was  partly  under- 
stood in  the  courts  of  equity.'  And 
in  a  very  recent  case  the  court  of 
appeals  of  New  York,  than  which 
no  court  has  more  steadfastly  ad- 
hered to  the  old  form  of  stating  the 
rule,  has  held  that  a  partnership, 
though  not  strictly  a  legal  entity  as 
distinct  from  the  persons  composing 
it,  yet  being  commonly  so  regarded 
by  men  of  business,  might  be  so 
treated  in  interpreting  a  commercial 
contract.  Bank  of  Buffalo  v. 
Thompson,  121  N.  Y.  280,"  24  N.  E. 
473,  Burd.  Cas.  286,  Gilm.  Cas.  152. 


10 


DEFINITIONS  AND  DISTINCTIONS  [§  7 

It  is  true  that  there  are  points  in  the  law  of  partnership  at 
which  the  adoption  of  the  entity  theory,  or  the  rule  of  corpora- 
tion law,  would  simplify  the  problem,  and  it  is  this  fact  which 
has  made  that  theory  so  attractive.  The  general  adoption  of 
that  theory,  however,  would  amount  practically  to  the  abolition 
of  partnerships  and  the  substitution  of  a  more  or  less  crude 
type  of  corporations.  The  English  Partnership  Act  does  not 
adopt  it,  and  the  American  Uniform  Partnership  Act  has  wisely 
been  framed  upon  the  common  law  theory. 

In  general,  it  is  true  in  our  law  that  natural  persons  can- 
not transform  themselves  into,  or  create  from  themselves,  a 
juristic  or  legal  person  by  their  own  act  alone  and  without  the 
declared  authority  or  consent  of  the  state. 

The  United  States  Bankruptcy  Act  of  1898  does  undoubtedly 
to  a  limited  extent  treat  the  partnership  as  an  entity,  but  the 
somewhat  extreme  views,  as  to  the  effect  of  this  statute,  an- 
nounced by  some  of  the  circuit  and  district  courts  have  been  dis- 
approved by  the  United  States  Supreme  Court.20 

§7.  Same  subject — The  commercial  conception  of  partner- 
ship.— The  ordinary  commercial  conception  of  a  partnership  is 
undoubtedly  different  from  that  of  the  common  law.  "Com- 
mercial men  and  accountants,"  says  Mr.  Justice  Lindley,  "are 
apt  to  look  upon  a  firm  in  the  light  in  which  lawyers  look  upon 
a  corporation,  i.  e.,  as  a  body  distinct  from  the  members  com- 
posing it,  and  having  rights  and  obligations  distinct  from  those 
of  its  members.  Hence,  in  keeping  partnership  accounts,  the 
firm  is  made  debtor  to  each  partner  for  what  he  brings  into  the 

But  see  People  v.  Coleman  (1892),  L.  ed.  1029  (aff 'g  108  C.  C.  A.  459, 
133  N.  Y.  279,  31  N.  E.  96,  16  L.  E.  186  Fed.  481),  expressing  the  pref- 
A.  183;  Matter  of  Peck  (1912),  erence  of  that  court  for  the  views  of 
206  N.  Y.  55,  99  N.  E.  258,  31  Ann.  Vaccaro  v.  Security  Bank  of  Mem- 
Gas.  798,  41  L.  E.  A.  (N.  S.)  1223;  phis  (1900),  43  C.  C.  A.  279,  103 
Jones  v.  Blun  (1895),  145  N.  Y.  333,  Fed.  436,  over  those  of  In  re  Berten- 
39  N.  E.  954,  Gilm.  Gas.  150.  shaw  (1907),  85  C.  C.  A.  61,  157 

See  also  Professor  Drake's  article  Fed.  363,  17  L.  E.  A.  (N.  S.)  886, 
in  15  Michigan  Law  Eeview,  609,  as  13  Ann.  Gas.  986,  where  the  major- 
to  this  dictum  of  Sir  George  Jessel.  ity  of  the  court  emphasized  the  en- 

20  See  Francis  v.  McNeal  (1913),  tity  theory. 
228  U.  S.  695,  33  Sup.  Ct.  701,  57 

11 


§7] 


LAW   OF  PARTNERSHIP 


common  stock,  and  each  partner  is  made  debtor  to  the  firm  for 
all  that  he  takes  out  of  that  stock.  In  the  mercantile  view, 
partners  are  never  indebted  to  each  other  in  respect  of  part- 
nership transactions,  but  are  always  either  debtors  to  or  creditors 
of  the  firm.  *  *  *  The  partners  are  the  agents  and  sureties 
of  the  firm:  its  agents  for  the  transaction  of  its  business;  its 
sureties  for  the  liquidation  of  its  liabilities  so  far  as  the  assets 
of  the  firm  are  insufficient  to  meet  them.  The  liabilities  of  the 
firm  are  regarded  as  the  liabilities  of  the  partners  only  in  case 
they  cannot  be  met  by  the  firm  and  discharged  out  of  its  assets. 
But  this  is  not  the  legal  notion  of  a  firm.  The  firm  is  not  recog- 
nized by  lawyers  as  distinct  from  the  members  composing  it."81 
Though  the  legal  and  the  mercantile  views  are  thus  distinct, 
there  is  in  many  quarters  a  tendency  to  incorporate  the  mer- 
cantile conception  in  the  legal  theory  as  largely  as  the  inherent 
nature  of  the  partnership  will  permit.  When  not  carried  be- 


21  Lindley  on  Partnership  (Ew- 
ell's  2d  Am.  ed.),  voL  I,  p.  110. 

But  there  is  great  practical  diffi- 
culty in  completely  adopting  the 
mercantile  theory.  Thus  in  Ex 
parte  Beauchamp  (1894),  1  Q.  B. 
1,  where  a  receiving  order  in  bank- 
ruptcy had  been  made  against  a 
firm  composed  of  an  adult  and  an 
infant,  Kay,  L.  J.,  said:  "The 
receiving  order  is  made  against  the 
firm,  and  the  case  has  been  argued 
as  though  the  firm  had  a  separate 
existence  as  distinguished  from  the 
individual  members  of  the  firm;  in 
other  words,  as  if  it  were  a  cor- 
poration having  a  separate  exist- 
ence from  the  individuals  which 
compose  it.  It  is  no  such  thing, 
and  the  rules  (permitting  proceed- 
ings in  the  firm  name)  do  not  mean 
anything  of  the  kind.  Under  the 
rules,  facilities  have  been  given  for 
proceeding  against  a  firm  in  the 
firm  name,  for  this  simple  reason — 
that  it  is  not  always  easy  to  find 


out  who  are  the  partners  in  a  firm. ' ' 
(See,  also,  Ex  parte  Corbett  (1880), 
14  Ch.  D.  122;  Drucker  v.  Well- 
house  (1888),  82  Ga.  129,  8  S.  E. 
40,  2  L.  E.  A.  328;  Harris  v.  Vis- 
scher  (1876),  57  Ga.  229;  Cham- 
bers v.  Sloan  (1855),  19  Ga.  84; 
Adams  v.  Church  (1902),  42  Oreg. 
270,  70  Pae.  1037,  95  Am.  St.  E. 
740,  59  L.  E.  A.  782;  Wiggins  v. 
Blackshear  (1894),  86  Tex.  665,  26 
S.  W.  939.)  So  in  a  late  case  in 
New  York — Jones  v.  Blun  (1895), 
145  N.  Y.  333,  39  N.  E.  954— the 
court,  notwithstanding  what  was 
said  in  Bank  of  Buffalo  v.  Thomp- 
son, supra,  points  out  that  it  is 
only  for  certain  purposes  that  the 
partnership  may  be  regarded  as  an 
entity.  See,  also,  Matter  of  Peck 
(1912),  206  N.  Y.  55,  99  N.  E.  258, 
41  L.  B.  A.  (N.  S.)  1223,  and  the 
remarks  of  Holmes,  J.,  at  the  end 
of  his  opinion  in  Hallowell  v. 
Blackstone  Bank  (1891),  154  Mass. 
359,  28  N.  E.  281,  13  L.  E.  A.  315. 


12 


DEFINITIONS  AND  DISTINCTIONS  [§  8 

yond  the  bookkeeping  aspect  the  tendency  is  harmless  enough, 
and  though  the  practical  consequences  of  the  changed  concep- 
tion are  usually  not  pronounced,  it  often  aids  in  a  clearer  con- 
ception of  the  relative  rights  and  powers  of  the  partners  col- 
lectively and  the  partners  as  individuals. 

So  in  a  recent  case  before  the  Supreme  Court  of  the  United 
States,22  it  was  said  by  Justice  Holmes:  "Since  Cory  on  Ac- 
counts was  made  more  famous  by  Lindley  on  Partnership  the 
notion  that  the  firm  is  an  entity  distinct  from  its  members  has 
grown  in  popularity,  and  the  notion  has  been  confirmed  by  re- 
cent speculations  as  to  the  nature  of  corporations,  and  the  one- 
ness of  any  somewhat  permanently  combined  group  without  the 
aid  of  law.  But  the  fact  remains  as  true  as  ever  that  partner- 
ship debts  are  debts  of  the  members  of  the  firm,  and  that  the 
individual  liability  of  the  members  is  not  collateral  like  that  of  a 
surety,  but  primary  and  direct,  whatever  priorities  there  may 
be  in  the  marshalling  of  assets.  The  nature  of  the  liability  is 
determined  by  the  common  law." 

§  8.  How  a  partnership  differs  from  a  corporation. — A  part- 
nership differs  in  material  respects  from  a  corporation. 

A  partnership  is  a  voluntary,  unincorporated  association  of 
individuals  whose  legal  relation  is  based  upon  their  agreement, 
and  needs  no  special  statutory  authority  to  give  it  force  and 
effect.  They  continue  to  act  in  this  relation  as  individuals. 
In  the  absence  of  a  statute,  they  sue  and  are  sued  only  in  their 
individual  names.  The  death  of  one  operates  usually  to  ter- 
minate the  relation.  The  transfer  of  the  interest  of  one  has 
usually  the  same  effect,  and  operates,  not  to  introduce  the  trans- 
feree into  the  relation,  as  a  party  to  it,  but  merely  to  give  him 
such  share  as  his  transferrer  would  have  upon  a  dissolution. 
Each  partner  is,  in  general,  personally  and  directly  responsible 
for  all  the  debts  of  the  partnership,  notwithstanding  that  he  has 
fully  paid  in  his  agreed  contribution. 

A  corporation,  on  the  other  hand,  is  a  distinct  legal  entity, 

92  Francis  v.  McNeal  (1913), 
228  TT.  S.  695,  33  Sup.  Ct.  701,  57 
L.  ed.  1029. 

13 


§§9,  10]  LAW  OF  PAETNERSHIP 

created  by  some  express  legislative  authority,  either  special  to 
the  particular  case  or  general  in  like  cases.  It  acts  in  its  cor- 
porate capacity  only,  without  regard  to  the  individuals  who 
compose  it.  It  may  sue  and  be  sued  in  its  own  name.  The  death 
of  one  or  more  corporators  does  not  dissolve  it.  One  corporator 
may  transfer  his  share  without  affecting  the  corporate  existence, 
and  his  transferee  may  take  his  place  in  the  corporation,  which 
proceeds  without  regard  to  changes  in  the  personnel  of  the  cor- 
porators. One  corporator,  having  paid  his  subscription,  is  not 
usually  subject  to  any  further  personal  responsibility  for  the 
debts  of  the  concern  unless  some  statute  imposes  such  a  respon- 
sibility. In  these  characteristics  of  limited  liability,  facility  of 
transfer,  and  immunity  from  dissolution  by  death,  are  found  the 
leading  inducements  to  the  formation  of  corporations. 

§9.  Intermediate  associations. — In  many  of  the  states,  stat- 
utes have  provided  for  the  organization  of  associations  partak- 
ing more  or  less  of  the  characteristics  of  both  partnerships  and 
corporations.  Thus,  there  are  joint-stock  companies,  which  us- 
ually are  simply  partnerships  with  transferable  shares ; 23  part- 
nership associations,  limited,  which  are  usually  but  a  crude  form 
of  corporation ;  and  limited  partnerships,  which  are  partnerships 
having  one  or  more  general  members  subject  to  the  usual  lia- 
bilities of  partners,  and  also  one  or  more  special  partners  whose 
liability  is  limited  to  the  amount  contributed.  The  legal  pe- 
culiarities of  these  several  types  will  be  more  fully  considered 
in  later  chapters.  In  a  considerable  number  of  States  there 
are  constitutional  provisions  that  associations  having  any  of  the 
characteristics  of  corporations  not  possessed  by  ordinary  part- 
nerships shall,  for  many  purposes,  be  deemed  to  be  corporations. 

§10.  Clubs,  societies,  etc — In  addition  to  these  are  other 
bodies,  not  statutory,  and  not  organized  for  the  purpose  of 
pecuniary  profit,  which  it  is  sometimes  sought  to  hold  liable  as 
partnerships,  but  which  are  not  such  in  fact.  Of  these  the  unin- 

23  While  joint  stock  companies  are  may  be  created  by  the  contract  of 
usually  provided  for  by  statute,  a  the  members.  See  Phillips  v.  Blatch- 
partnership  with  transferable  shares  ford  (1884),  137  Mass.  510, 

14 


DEFINITIONS  AND  DISTINCTIONS 


[§11 


corporated  social  clubs,  committees,  lodges,  fraternal  societies, 
Christian  associations,  granges  and  many  co-operative  associa- 
tions, are  common  examples.  Such  bodies  are  not  engaged  in 
business,  are  not  organized  for  pecuniary  profit,  and  are  there- 
fore ordinarily  not  partnerships,  nor  is  the  liability  of  a  member 
to  be  determined  by  the  law  of  partnership,  but  by  that  of  prin- 
cipal and  agent — those,  and  those  only,  being  liable  as  principals 
who  have  expressly  or  impliedly  authorized  acts  to  be  done  in 
their  behalf,  or  who  have  subsequently  ratified  them.24 

Of  course,  if  such  a  body  were  actually  engaged  in  carrying 
on  a  business  with  a  view  to  profit,  it  would  ordinarily  be  deemed 
to  be  a  partnership. 

§11.  Joint-tenancy  and  co-ownership. — Joint-tenants  and 
tenants  in  common  are  not  thereby  partners.86  While  they  have 
some  similarities,26  they  differ  in  many  particulars,  of  which  the 
following  are  the  most  important : 


24Flemyng  v.  Hector  (1836),  2 
Mees.  &  Wels.  172;  Todd  v.  Emly 
(1841),  7  id.  427;  S.  C.,  8  id.  505; 
Lafond  v.  Deems  (1880),  81  N.  Y. 
507;  Eichbaum  v.  Irons  (1843),  6 
Watts  &  Serg.  (Pa.)  68,  40  Am. 
Dec.  540;  Ash  v.  Guie  (1881),  97 
Pa.  493,  39  Am.  Eep.  818,  Mechem's 
Gas.  on  Partn.  721,  Burd.  Gas.  30; 
Davison  v.  Holden  (1887),  55  Conn. 
103,  10  Atl.  515,  S  Am.  St.  E.  40; 
Burt  v.  Lathrop  (1883),  52  Mich. 
106,  Mechem's  Gas.  on  Partn.  4. 

See  many  other  cases  cited,  ante, 
§3. 

25  See  1  Lindley  on  Partn.  (Ew- 
ell's  2d  Am.  ed.),  p.  52;  Dunham 
v.  Loverock  (1893),  158  Pa.  197, 
27  Atl.  990,  38  Am.  St.  E.  838, 
Mechem's  Partn.  Gas.  6;  French 
v.  Styring  (1857),  2  Com.  B,  N. 
S.  357,  Mechem's  Partn.  Gas.  765, 
Ames  Gas.  41,  Burd.  Gas.  22;  Goell 
v.  Morse  (1879),  126  Mass.  480, 


Meehem's  Partn.  Gas.  767,  Burd. 
Gas.  23;  Quackenbush  v.  Sawyer 
(1880),  54  Gal.  439,  Mechem's 
Partn.  Gas.  768,  Burd.  Gas.  25, 
Gilm.  Gas.  66;  Oliver  v.  Gray 
(1842),  4  Ark.  425,  Burd.  Gas. 
16;  Logan  v.  Oklahoma  Mill  Co. 
(1904),  14  Okla.  402,  79  Pac.  103, 
Gilm.  Gas.  61;  Sikes  v.  Work 
(1856),  6  Gray  (Mass.)  433.  Com- 
pare Fleming  v.  Fleming  (1919), 
—  Iowa  — ,  174  N.  W.  946. 

Many  other  cases  are  cited,  post, 
§83. 

26  Partnership  and  joint  tenancy 
have  each  a  form  of  survivorship, 
but  while  that  of  joint  tenancy  is 
absolute,  that  of  partnership  is 
qualified  and,  in  a  sense,  fiduciary. 
See  post,  §  402-3.  Tenancy  in  com- 
mon bears  a  closer  resemblance, 
and  the  two  relations,  especially  in 
the  case  of  property  in  land,  are 
often  quite  closely  assimilated. 


15 


§  12]  LAW  OP  PARTNERSHIP 

1.  Co-ownership  is  not  necessarily  the  result  of  an  agreement 
to  create  it,27  while  partnership  is.28 

2.  Co-ownership  does  not  necessarily  involve  community  of 
profit  or  loss,29  while  partnership  does.30 

3.  One  co-owner  may,  without  the  consent  of  the  others,  as- 
sign his  interest  in  such  a  way  that  his  assignee  will  assume 
his  relations  to  the  other  co-owners,31  but  one  partner  cannot 
do  this.32 

4.  One  co-owner  is  not  as  such  the  agent  of  the  others,33  while 
a  partner  is.34 

5.  One  co-owner  has  no  lien  on  the  common  property  for 
expenses  or  outlays,  or  for  what  may  be  due  from  the  others 
as  their  share  of  a  common  debt,36  while  a  partner  has  such  a 
lien.88 

Other  distinctions  exist,  but  these  are  sufficient  to  illustrate 
the  differences. 

§  12. But  while  the  legal  distinction  between  partner- 
ship and  co-ownership  as  such  is  thus  clearly  defined,  it  is  possible 
that  the  co-owners  may  so  deal  with  their  common  property  as 
to  assume  very  nearly,  if  not  entirely,  the  attitude  of  partners. 
Thus,  when  they  employ  it  in  business  with  a  view  to  profit, 
and  divide  such  profits  between  them,  partnership  may  result.37 
Even  the  division  of  the  gross  proceeds  of  the  employment  of 
their  common  property  was  formerly  deemed  sufficient  to  render 
them  liable  as  partners,  though  this  view  is  now  generally  aban- 
doned, as  will  be  seen  in  a  later  section.88  Until,  however,  it 
appears  that  they  have  changed  their  position  to  that  of  part- 
ners, their  relation  as  co-owners  will  be  presumed  to  continue; 
and  he  who  asserts  that  the  change  has  taken  place  has  the 

They  differ,  nevertheless,   in  many  34  See  post,  §  244. 

important  respects  as  will  be  seen  35  Lindley,  supra;  Goell  v.  Morse, 

in  the  text.     See,  also,  post,  §  163.  supra. 

87  Lindley  on  Partnership,  supra.  36    See  post,  §  431. 

88  See  ante,  §4;  post,  §72.  37 See  post,  §83;   Butler  Savings 

89  Lindley,  ubi  supra.  Bank   v.   Osborne    (1893),    159   Pa. 
30  See  post,  §§75-77.  10,  28  Atl.  163,  39  Am.  St.  R.  665, 
81  Lindley,  ubi  supra.  Gilm.   Gas.   58;    Noyes  v.    Cushman 

32  See  post,  §57.  (1853),  25  Vt.  390,  Gilm.  Gas.  65. 

33  Lindley,  supra.  88  See  post,  §§86,  87. 

16 


DEFINITIONS  AND  DISTINCTIONS  ^§  13,  14 

burden  of  proving  it,  and  he  can  not  do  it  merely  by  evidence 
of  facts  which  are  as  consistent  with  the  continuance  of  the  old 
relation  as  with  the  formation  of  a  new  one.89 

The  Uniform  Partnership  Act  recognizes  the  distinction  be- 
tween co-ownership  and  partnership.  It  provides  that  "joint 
tenancy,  tenancy  in  common,  tenancy  by  the  entireties,  joint 
property,  common  property,  or  part  ownership  does  not  of  it- 
self establish  a  partnership,  whether  such  co-owners  do  or  do 
not  share  any  profits  made  by  the  use  of  the  property."  40 

§  13.  Joint  purchasers  of  goods,  etc.,  for  division,  use,  etc. — 

Persons  who  unite  to  purchase  goods  or  other  property  for  the 
purpose  of  dividing  the  property  specifically  between  themselves 
are  not  thereby  rendered  partners.41  Neither  are  they  where 
they  merely  purchase  the  property  for  use,42  unless,  indeed,  the 
use  constitutes  their  business,43  or  it  is  purchased  for  use  in  a 
business  which  is  carried  on  in  partnership.44 

§  14.  Joint  purchasers  of  goods,  etc.,  for  resale. — If  several 
persons  jointly  purchase  goods  or  other  property  in  a  particu- 
lar instance  for  resale,  with  a  view  to  divide  the  profits  arising 
from  the  transaction,  a  partnership  may  thereby  be  created,48 
though  it  is  not  necessarily  so.  Even  though  they  purchase  for 
the  purpose  of  resale,  their  agreement  may  show  that  no  general 

39  Dunham    v.    Loverock,    supra;      21,  Gilm.  Gas.  84;  Eocky  Mt.  Stud 
Butler    Savings    Bank    v.    Osborne,       Farm  Co.  v.  Lunt  (1915),  46  Utah 
supra.  299,  151  Pac.  521   (farmers  uniting 

40  See.  7,  subdiv.  2.  to  buy  horse  for  use  in  breeding). 
« See   Coope  v.   Eyre    (1788),   1          43  See  Noyes  v.  Oushman  (1853), 

H.    Black.    37,    Mechem's   Gas.   96;  25   Vt.    390,    Gilm.    Gas.    65;    State 

Hoare    v.    Dawes    (1780),    1    Doug.  National    Bank    v.    Butler    (1894), 

371,    Ames    Gas.   4,   Burd.    Gas.    1,  149  111.  575,  36  N.  E.  1000. 

Gilm.    Gas.    1;    Gibson   v.    Lupton  44  See  Davis  v.  Davis,    [1894]    1 

(1832),    9    Bing.    297;     Logan    v.  Ch.  393. 

Oklahoma  Mill  Co.  (1904),  14  Okla.  45  Reid  v.  Hollinshead   (1825),  4 

402,   79   Pac.    103,   Gilm.   Gas.   61;  Barn.   &   Cr.   867,  Ames'   Gas.   29; 

Morse  v.  Pacific  Ry.  Co.  (1901),  191  Jones   v.    Davies    (1899),    60    Kan. 

111.  356,  61  N.  E.  104.  309,    56   Pac.   484,   72   Am.   St.   R. 

42  See  Halme  v.  Smith   (1831),  7  354;    Moore    v.    Thompson    (1919), 

Bing.  709,  Ames  Cas.  35,  Burd.  Gas.  —  Kan.  — ,  184  Pac.  980. 

Mech.  Part. — 2  17 


§15] 


LAW  OP  PARTNERSHIP 


or  commercial  partnership  was  intended,46  as  where  they  ex- 
pressly deny  to  each  the  ordinary  attributes  of  partnership, 
such  as  the  power  of  either  to  sell  or  incur  indebtedness  without 
the  concurrence  of  the  other;47  and  a  single,  isolated,  casual 
purchase  of  land  or  chattels,  by  persons  not  otherwise  partners, 
with  a  view,  not  to  deal  in  the  property  as  a  business,  but  merely 
to  hold  it  until  it  can  be  sold  at  an  advance,  can  rarely  be 
deemed  to  create  a  partnership.48  And  this  is  true  even  though 
it  is  agreed  that  there  may  be  partnership  in  a  single  adven- 
ture.49 The  nature  of  the  contract,  the  situation  and  attitude 
of  the  parties,  and  the  circumstances  of  the  purchase  must  deter- 
mine the  question.  Many  of  the  cases  are  confessedly  difficult 
to  distinguish.  It  is  to  this  class  of  transactions  that  the  term 
"joint  venture,"  referred  to  in  a  following  section,60  is  fre- 
quently applied. 

§  15.  Workmen  dividing  product  or  proceeds. — For  reasons 
similar  to  those  referred  to  in  the  preceding  sections,  the  fact 

common  and  not  partners.  Com- 
pare French  v.  Styring  (1857),  2 
Com.  B.  (N.  S.)  357,  Mechem's  Cas. 
765,  Ames'  Cas.  41,  Burd.  Cas.  22; 
Quackenbush  v.  Sawyer  (1880),  54 
Cal.  439,  Mechem's  Cas.  768,  Burd. 
Cas.  25,  Gilm.  Cas.  66. 

48 See  Clark  v.  Sidway  (1891), 
142  IT.  S.  682,  35  L.  ed.  1157; 
12  S.  Ct.  327;  Bruce  v.  Hastings 
(1867),  41  Vt.  380,  98  Am.  Dec. 
592;  Farrand  v.  Gleason  (1884), 
56  Vt.  633,  Burd.  Cas.  2£;  Jones  v. 
Gould  (1913),  209  N.  Y.  419,  103 
N.  E.  720;  Sutton  v.  Mo.,  etc.,  Ey. 
Co.  (1919),  104  Kan.  282,  178  Pac. 
418;  Jackson  v.  Hooper  (1909),  76 
N.  J.  Eq.  185,  74  Atl.  130  (but  see 
case  reversed  and  held  on  different 
theory,  76  N.  J.  Eq.  592,  75  Atl. 
568,  27  L.  R.  A.  (N.  S.)  658  and 
many  other  cases  cited,  post,  §  16. 

49  Post,  §43. 

50  Post,  §16. 


46  Thus  it  is  said  in  Williams  v. 
Gillies  (1878),  75  N.  Y.  197,  "Con- 
ceding a  community  of  interest, 
and  in  some  sense  a  partnership,  it 
does  not  follow  that  all  the  inci- 
dents and  liabilities  of  a  commer- 
cial partnership  attach.  The  trans- 
action must  be  construed  with  ref- 
erence to  the  character  of  the  prop- 
erty and  the  legal  rules  applicable 
to  it."  See,  also,  Jones  v.  Gould 
(1913),  209  N.  Y.  419,  103  N.  E. 
720. 

«Goell  v.  Morse  (1879),  126 
Mass.  480,  Mechem's  Cas.  767, 
Burd.  Cas.  23.  Here  two  men 
bought  a  horse  for  the  purpose  of 
resale  at  a  profit,  but  it  was  agreed 
that  either  one  who  should  have 
possession  of  the  horse  should  feed 
him  at  his  own  expense,  and  though 
each  was  to  endeavor  to  find  a 
purchaser,  neither  was  to  sell  with- 
out the  concurrence  of  the  other. 
They  were  held  to  be  tenants  in 


18 


DEFINITIONS  AND  DISTINCTIONS  [§  16 

that  two  or  more  workmen,  who  are  not  otherwise  partners, 
unite,  in  a  particular  instance,  to  do  a  piece  of  work  and  to 
divide  the  thing  made,  or  to  sell  the  product  and  divide  the 
proceeds,  does  not  of  itself  constitute  them  partners.51  It  is 
not  done  as  a  business  with  a  view  to  profit.  Thus  if  two  men 
go  fishing  together  and  divide  the  catch ; 52  if  one  man  furnishes 
a  farm  and  another  furnishes  the  seed  and  labor  to  raise  a  crop 
which  they  divide  between  them ; 53  if  a  wheelwright  and  a  black- 
smith unite  to  make  and  iron  a  wagon,  and  then  sell  it  and  divide 
the  price,  they  are  not  thereby  constituted  partners  either  in  the 
particular  adventure  or  in  such  ventures  generally.  Many  fur- 
ther illustrations  will  be  given  in  a  later  section.54 

§  16.  Joint  ventures — Syndicates. — Other  cases  of  particular 
and  peculiar  contracts  for  associated  enterprise  occasionally 
present  themselves,  usually  in  connection  with  the  purchase,  for 
ultimate  sale  or  division,  of  a  particular  piece  of  property.55 
In  several  modern  cases  a  tendency  to  distinguish  them  by  the 
name  of  "joint  ventures"  has  been  manifested,56  though  this 

51  Two  lawyers,  not  partners,  who  83,  43   Am.   Eep.   732;    Putnam  v. 

take  a  particular  case  together  and  Wise   (1841),  I  Hill   (N.  Y.)   234, 

agree   to    divide   the    fees,    do    not  37  Am.  Dec.  309 ;  Donnell  v.  Harshe 

thereby  become  partners:   Willis  v.  (1877),  67  Mo.  170,  Gilm.  Cas.  63; 

Crawford   (1901),  38  Oreg.  522,  64  Blue  v.  Leathers  (1853),  15  HI.  31; 

Pac.  866,  53  L.  E.  A.  904.  Logan  v.  Oklahoma  Mill,Co.  (1904), 

See  cases  of  men  jointly  doing  a  14  Okla.  402,  79  Pac.  103;  Cherry 

job  of  lumbering:   Dwinel  v.  Stone  v.   Strong    (1895),   96   Ga.   183,   22 

(1849),    30    Me.    384,    Burd.    Cas.  S.    E.    707,   Burd.    Cas.   28;    Kelly 

17;     McAlpine    v.    Millen     (1908),  v.    Eummerfield    (1903),    117    Wis. 

104    Minn.    289,    116    N.    W.    583;  620,  94  N.  W.  649,  98  Am.  St.  E. 

Butcher  v.  Buck    (1893),  96  Mich.  951;  Wagner  v.  Buttles  (1913),  151 

160,    55   N.   W.    676,   20   L.   E.   A.  Wis.    668,    139    N.    W.    425,    Ann. 

776,  Mechem's  Cas.  749.  Cas.    1914    B,    144;     Cedarberg    v. 

52 See  Hurley  v.  Walton    (1872),  Guernsey    (1899),    12    S.    Dak.    77, 

63    111.     260;     Baxter    v.    Rodman  80  N.  W.  159;   Williams  v.  Rogers 

(1826),    20   Mass.    (3    Pick.)    435;  (1896),   110   Mich.  418,  68   N.  W. 

Cambra  v.  Santos  (1919),  —  Mass.  240. 

— ,  123  N.  E.  503.  54  See  post,  §  83. 

53  See   Eeynolds  v.  Pool    (1881),  65  See  ante,  §  14. 

84  N.   Car.   37,   37  Am.   Eep.  607;  56  See  Jones  v.  Gould  (1913),  209 

Day   v.    Stevens    (1883),   88   N.    C.  N.  Y.  419,  103  N.  E.  720;  Boss  v. 

19 


§16] 


LAW  OF  PARTNERSHIP 


name  is  not  particularly  illuminating.  They  are  also  sometimes 
called  "syndicates,"  but  this  name  is  not  more  distinguishing 
than  the  other.  They  frequently  have  some  of  the  character- 
istics of  partnership,  but  they  are  usually  not  partnerships,  at 
least  of  the  commercial  or  trading  class,67  and  the  rights  and 
liabilities  of  the  parties,  where  there  are  no  elements  of  estoppel, 
are  to  be  worked  out  by  a  consideration  of  the  terms  of  the  con- 
tract and  of  the  powers  and  authorities  in  fact  conferred.88  The 
implied  authority  of  the  associates  to  bind  each  other  by  con- 
tracts is  usually  very  limited.69  Persons  so  situated  who  have 
acquired  property  which  they  are  to  hold  until  they  unite  in 
disposing  of  it  do  not  usually  contemplate  or  require  any  acts 
of  agency  by  one;  there  are  ordinarily  no  incidental  contracts 


Burrage    (1919),  —  Mass.  — ,  124 
N.  E.  267. 

The  term  "joint  adventure" 
seems  to  be  also  used,  as  in  Butler 
v.  Union  Trust  "Co.  (1918),  178 
Cal.  195,  172  Pac.  601;  Jackson  v. 
Hooper  (1909),  76  N.  J.  Eq.  185, 

74  Atl.   130    (reversed  and  put  on 
different  theory,  76  N.  J.  Eq.  592, 

75  Atl.  568,  27  L.  E.  A.   (N.  S.) 
658);    Keyes   v.   Nims    (1919),   — 
Cal.  — ,  184  Pac.  695;  McCarney  v. 
Lightner   (1920),  —  Iowa  — ,  175 
N.    W.    751;    Thimsen    v.    Beigard 
(1920),  —  Oreg.  — ,  186  Pac.  559. 

67  Thus  in  Butler  v.  Union  Trust 
Co.,  supra,  the  court  says:  "It  is 
sometimes  a  close  question  whether 
a  transaction  constitutes  a  partner- 
ship or  a  joint  adventure." 

58  That  no  partnership  resulted, 
in  the  particular  case,  see  Butler  v. 
Union  Trust  Co.,  supra;  Jackson 
v.  Hooper,  supra;  Jones  v.  Gould, 
supra;  Clark  v.  Sidway  (1891),  142 
U.  S.  682,  35  L.  ed.  1157,  12  8. 
Ct.  327;  Farrand  v.  Gleason 
(1884),  56  Vt.  633,  Burd.  Gas.  27; 
Central  Trust  Co.  v.  Creel  (1919), 
184  Ky.  114,  211  S.  W.  421;  Bruce 


v.  Hastings  (1868),  41  Vt.  380, 
98  Am.  Dec.  592,  Gilm.  Cas.  71; 
Gottschalk  v.  Smith  (1895),  156  111. 
377,  40  N.  E.  937;  Wade  v.  Horna- 
day  (1914),  92  Kan.  293,  140  Pac. 
870;  Coward  v.  Clanton  (1898),  122 
Cal.  451,  55  Pac.  147. 

Calling  the  associates  partners, 
see  Kayser  v.  Maugham  (1885),  8 
Colo.  232,  6  Pac.  803;  Jones  v. 
Davies  (1899),  60  Kan.  309,  56 
Pac.  484,  72  Am.  St.  E.  354;  Spen- 
cer v.  Jones  (1899),  92  Tex.  516, 
50  S.  W.  118,  71  Am.  St.  B.  870; 
Yeoman  v.  Lasley  (1883),  40  Ohio 
St.  190;  Hulett  v.  Fairbanks 
(1883),  40  Ohio  St.  233;  Mitchell 
v.  Tonkin  (1905),  109  N.  Y.  App. 
Div.  165,  95  N.  Y.  S.  669;  Canada 
v.  Barksdale  (1881),  76  Va.  899; 
Torbert  v.  Jeffrey  (1900),  161  Mo. 
645,  61  S.  W.  823 ;  Phillips  v.  Eeyn- 
olds  (1908),  236  111.  119,  86  N.  E. 
194. 

Calling  the  arrangement  a ' '  pool, ' ' 
see  Green  v.  Higham  (1900),  161 
Mo.  333,  61  S.  W.  79$. 

89  See  Jones  v.  Gould,  supra; 
Keyes  v.  Nims,  supra. 


20 


DEFINITIONS  AND  DISTINCTIONS 


[§17 


to  be  made;  the  parties  intend  to  act  unitedly  when  they  act 
at  all;  and  consequently  there  is  no  ground  for  implying  any 
general  authority  in  one  to  act  for  all.  Only  the  consent  of  all, 
or  the  rare  case  of  overpowering  necessity,  would  create  an 
authority. 

In  most  other  respects  their  relation  is  governed  by  the  or- 
dinary rules  of  partnership,60  though  there  is  unfortunately 
much  apparent  conflict  in  the  cases. 

§17.  Members  of  defectively-organized  corporations. — 
Whether  persons  are  to  be  held  liable  as  partners  who  have 
engaged  in  business  in  pursuance  of  an  unsuccessful  attempt 
to  organize  a  corporation  is  a  question  which  presents  many 
difficulties  and  upon  which  the  authorities  are  in  conflict.  It 
is  contended,  on  the  one  hand,  that  where  the  association  has 
done  business  and  entered  into  contracts  as  a  corporation,  the 
individuals  composing  it  cannot,  in  case  it  appears  that  no  cor- 


60  Thus  in  Butler  v.  Union  Trust 
Co.,  supra,  the  court  said:  "A 
joint  adventure  is  similar  to  a  part- 
nership, and,  being  of  a  similar 
nature,  the  right  to  an  accounting 
of  profits  in  accordance  with  the 
agreement  therefor,  and  the  obli- 
gations growing  out  of  such  agree- 
ment between  the  parties  are  gov- 
erned by  the  same  rules  of  law, 
Petrie  v.  Torrent,  88  Mich.  43,  49 
N.  W.  1076;  Causten  v.  Barnette, 
49  Wash.  659,  96  Pac.  225;  Claflin 
v.  Gross,  50  C.  C.  A.  300,  112  Fed. 
386,  whether  the  parties  were  tech- 
nically partners  or  not,  an  account- 
ing was  necessary  to  determine 
their  respective  rights,  Garr  v.  Bed- 
man,  6  Cal.  574."  Same  in  sub- 
stance: Marston  v.  Gould  (1877), 
69  N.  Y.  220.  (But  in  Clark  v. 
Sidway,  supra,  it  is  held  that  one 
associate  can  sue  another  at  law 
A>r  reimbursement  for  advances, 
and  is  not  obliged  to  resort  to 
equity.) 


That  the  same  rules  of  good  faith 
and  loyalty  apply  here  as  in  part- 
nership: Jackson  v.  Hooper,  supra; 
Thimsen  v.  Eeigard,  supra.  See, 
also,  Hulett  v.  Fairbanks,  supra; 
Stem  v.  Warren  (1919),  185  N.  Y. 
App.  Div.  823,  174  N.  Y.  Supp.  30. 
See  also  Central  Trust  Co.  v.  Creel 
(1919),  184  Ky.  114,  211  S.  W. 
421;  Selwyn  v.  Waller  (1914),  212 
N.  Y.  507,  106  N.  E.  321. 

In  National  Surety  Co.  v.  Win- 
slow  (1919),  —  Minn.  — ,  173  N. 
W.  181,  it  is  said :  "In  the  absence 
of  express  limitations  in  that  re- 
spect each  party  to  such  adventure 
is  subject  to  all  losses  and  liabili- 
ties, and  entitled  to  share  equally 
in  the  profits  of  the  undertaking. 
The  relationship  is  substantially 
that  of  a  copartnership." 

As  to  contribution  to  losses  among 
themselves,  see  Stettauer  v.  Carney 
(1878),  20  Kan.  474. 

See  discussion  in  33  Harvard  I* 
Review,  852. 


21 


§  18]  LAW   OP  PARTNERSHIP 

poration  really  existed,  be  personally  liable,  because  they  have 
never  contracted  as  individuals  or  intended  to  be  bound  as  such. 
To  hold  them  liable  as  partners  would  be  to  hold  them  upon  a 
contract  which  they  never  made  or  intended  to  make.  On  the 
other  hand,  it  is  contended  that  the  parties  must  have  intended 
to  become  liable  in  some  way,  and  inasmuch  as  they  have  failed 
to  bind  themselves  as  a  corporation,  it  must  be  assumed  that 
they  are  liable  as  partners — that  it  is  only  through  the  fact  that 
they  are  corporators  and  not  partners  that  they  escape  personal 
liability;  and  hence  if  the  corporate  shield  fails,  the  individual 
liability  necessarily  arises. 

The  matter,  however,  can  not  be  so  shortly  disposed  of,  and 
a  further  investigation  of  the  considerations  involved  is  indis- 
pensable. 

§  18.  As  has  already  been  seen,  a  corporation  is,  with 

us,  the  creature  of  statute,  and  without  such  a  statute  the  cor- 
poration can  not  ordinarily  exist.  The  statutes  providing  for 
the  organization  of  corporations  usually  prescribe  a  variety  of 
acts  to  be  done  by  the  proposed  incorporators  with  a  view  to 
regularity,  safety  and  publicity.  If  all  of  these  requirements 
are  properly  complied  with  a  valid  and  unimpeachable  incor- 
poration will  ordinarily  result, — what  is  often  described  as  a 
corporation  de  jure. 

Not  all  of  the  requirements  of  such  a  statute,  however,  will 
necessarily  be  rated  as  of  the  same  value  or  importance.  Some 
of  the  provisions  may  be  merely  directory  rather  than  man- 
datory. Certain  of  them  may  look  merely  to  order  and  regular- 
ity, rather  than  to  the  protection  of  the  substantial  interests  of 
the  parties  or  the  public.  The  state,  of  course,  may  insist  upon 
a  compliance  with  all  of  them ;  but  it  does  not  follow  that  private 
individuals  may  do  the  same  where  no  substantial  interest  of 
their  own  is  affected  by  the  non-compliance.  Public  interest 
may  require  that  corporate  bodies,  existing  in  fact,  in  pursuance 
of  a  genuine  attempt  to  comply  with  the  state's  requirements, 
shall  be  recognized  by  private  individuals  as  corporations  until 
the  state  sees  fit  to  interfere,  even  though  such  attempt  at  com- 
pliance be  not  in  all  respects  complete  and  perfect.  Such  a  body 
may  be  called  a  corporation  de  facto.  It  may  be  compared  to 

22 


DEFINITIONS  AND  DISTINCTIONS  [§§  19,20 

the  officer  de  facto,  whose  acts,  so  far  as  private  individuals  are 
concerned,  are  regarded  as  official,  even  though  his  title  to  the 
office  may  not  be  perfect,  if  he  be,  nevertheless,  permitted  to 
exercise  the  functions  of  the  office  with  public  acquiescence  or 
approval.61 

§  19.  The  corporation  de  facto  is  a  legal  institution,  like 

the  officer  de  facto.  It  arises  from  the  policy  of  the  law,  and, 
though  elements  of  estoppel  are  usually  to  be  found  in  the  cases 
in  which  it  is  recognized,  it  seems  to  be  established  that  it  is  not 
dependent  for  its  existence  upon  the  application  of  that  doc- 
trine.62 The  essentials  of  a  corporation  de  facto  are  ordinarily 
said  to  be  three : — 

1.  The  existence  of  a  valid  statute  under  which  such  a  cor- 
poration as  the  one  in  question  might  lawfully  be  created.     In 
some  states,  an  apparently  valid  statute,  i.  e.,  one  not  yet  de- 
clared unconstitutional,  answers  this  requirement. 

2.  An  attempt  at  compliance  with  it,  often  characterized  as 
"actual  and  bona  fide,"  but  which  should  be  colorable  or  appar- 
ent and  bona  fide. 

3.  A  user  or  exercise  of  the  corporate  powers  and  functions 
which  the  statute  contemplates.63 

§20.  Same  subject — Causes  of  failure  to  incorporate. — The 

reasons  why  it  is  alleged  that  no  valid  incorporation  has  been 
effected  may  be  numerous;  but  they  commonly  arrange  them- 
selves under  one  of  three  general  heads:  1.  The  entire  absence 
of  an  enabling  statute.  2.  The  uneonstitutionality  of  the  stat- 
ute relied  upon.  3.  The  failure  to  comply  with  the  require- 
ments of  a  valid  statute. 

61  See  Meehem  on  Public  Officers,  nesota,  etc.,  E.  Co.  (1895),  157  111. 
§§  318,  319.  641,  42  N.  E.  153;  Methodist  Church 

62  See  Society  Perun  v.  Cleveland  v.   Pickett    (1859)    19  N.  Y.   482), 
(1885),  43   Ohio  St.  481,  3  N.   E.  and    sometimes    (1)    a   statute   and 
357,  360.  (2)  an  attempt  at  compliance.  That 

63  Many    statements    of    the    con-  three    conditions    exist,    see    In    re 
ditions   of    a    de   facto   corporation  Gibbs'  Estate    (1893),  157  Pa.  59, 
name  but  two.    These  are  sometimes  27  Atl.  383,  22  L.  E.  A.  276,  Gilm. 
(1)   a  statute  and   (2)   user.    (e.  g.  Gas.  91. 

American  Loan  &  Trust  Co.  v.  Min- 

23 


§§  21,  22]  LAW  OP  PARTNERSHIP 

§21. 1.  Where  there  was  no  statute  at  all. — Cases  of 

this  sort  are  not  very  numerous,  but  they  may  arise  where  tHe 
parties  mistakenly  believe  that  a  particular  statute  is  in  force 
within  their  jurisdiction,  or  where  they  mistakenly  believe  that 
an  unquestioned  statute  is  broad  enough  to  cover  the  purpose 
for  which  they  seek  incorporation.  In  such  a  case,  there  can, 
of  course,  be  no  corporation  de  jure;  neither,  according  to  the 
generally  accepted  definition,  can  there  be  one  de  facto,  since 
the  first  element,  that  of  a  valid  statute,  is  lacking.  Unless  some 
estoppel  or  other  bar  can  be  raised,  tne  members,  notwithstand- 
ing all  attempts  at  compliance  and  entire  good  faith,  must  be 
liable  as  partners.64  Occasionally,  though  rarely,  there  will  be 
found  a  naked  assumption  of  corporate  form  without  reference 
to  any  statute. 

§  22. 2.  Where  a  statute,  apparently  valid,  was  uncon- 
stitutional.— It  not  infrequently  happens  that  parties  comply 
in  all  respects  with  a  statute,  apparently  valid,  but  which  is 
subsequently  held  to  be  unconstitutional.  In  such  a  case,  there 
can  clearly  be  no  corporation  de  jure.  Whether  there  can  be 
one  de  facto  is  in  dispute.  It  is  said,  on  the  one  hand,  that  an 
unconstitutional  statute  is  no  statute,  it  never  was  a  statute,  it 
was  void  from  the  beginning,  and  therefore  the  first  essential 
for  a  corporation  de  facto,  namely,  a  statute,  is  lacking.  Accord- 
ing to  this  view,  the  members  must  be  liable  as  partners,  unless 
some  estoppel  or  other  bar  can  save  them.  On  the  other  hand, 
it  is  urged  that,  since  every  one  is  entitled  if  not  bound  to  be- 
lieve that  the  legislature  has  not  exceeded  its  constitutional 

64  See   Davis   v.   Stevens    (1900),  34  S.  W.  841,  54  Am.  St.  E.   685 

104   Fed.   235,   Mechem  's   Gas.    724  (law  had  expired) ;  Sturges  v.  Van- 

(no  law);  American  L.  &  T.  Co.  v.  derbilt  (1878),  73  N.  Y.  384  (same). 

Minnesota,  etc.,  E.  Co.   (1895),  157  In  Empire  Mills  v.  Alston  Grocery 

HI.   641,  42   N.   E.   153    (no   law);  Co.    (1891),   4    Willson    (Tex.    Civ. 

Mandeville  v.  Courtright  (1906),  73  App.)  221,  15  S.  W.  200,  12  L.  E.  A. 

C.  C.  A.  321,  142  Fed.  97,  6  L.  E.  A.  366,  it  was  said  that  where  a  cor- 

(N.  S.)  1003  (statute  did  not  cover  poration  was  organized  in  one  state 

purpose  contemplated) ;  Vredenburg  to  do  all  its  business  in  another,  its 

v.  Behan   (1881),  33  La.  Ann.   627  shareholders  in  the  latter  state  would 

(same).     Cf.     Bradley     v.     Eeppell  be  liable  as  partners;  sed  quere. 
(1895),  133  Mo.  545,  32  S.  W.  645, 

24 


DEFINITIONS   AND  DISTINCTIONS 


[§23 


powers,  persons  who  in  good  faith  rely  upon  an  apparently  valid 
statute,  which  they  find  upon  the  statute  book,  not  yet  declared 
unconstitutional,  should  be  protected  as  against  all  attacks, 
except  a  direct  attack  by  the  state  itself.  Although  the  weight 
of  authority  seems  to  be  with  the  former  view,66  the  latter  is 
not  without  substantial  support.66 


§23. 


3.  Where  a  valid  statute  is  defectively  complied 


with. — Where  there  is  a  valid  statute,  and  the  only  defect 
complained  of  is  in  the  manner  of  complying  with  it,  a  different 
question  is  presented.  The  non-compliance  may  run  through 
all  degrees  from  a  practically  complete  compliance  to  a  practical 
failure  or  omission  to  comply  at  all.  A  perfect  compliance,  of 
course,  will  make  a  corporation  de  jure.  So  will  a  substantial 
compliance  with  all  of  the  requirements.67  Even  the  state  will 


65  See  Eaton  v.  Walker  (1889),  76 
Mich.  579,  43  N.  W.  638,  6  L.  E.  A. 
102,    Mechem's    Gas.    8;    Branden- 
stein  v.  Hoke  (1894),  101  Cal.  131, 
35  Pac.  562;  Clark  v.  American  Can- 
nel  Coal  Co.   (1905),  165  Ind.  213, 
73  N.  E.  1083,  112  Am.  St.  E.  217; 
Huber  v.  Martin    (1906),  127  Wis. 
412,   105  N.  W.   1031,  3   L.   E.  A. 
(N.  S.)  653,  115  Am.  St.  E.  1023. 

66  See  Eichards  v.  Minnesota  Sav- 
ings Bank  (1899),  75  Minn.  196,  77 
N.  W.  822;  Gardner  v.  Minneapolis, 
etc.,  Ey.  Co.   (1898),  73  Minn.  517, 
76  N.  W.   282;    Catholic  Church  v. 
Tobbein   (1884),  82  Mo.  418;   Coxe 
v.  State   (1895),  144  N.  Y.  396,  39 
N.  E.  400;  Mayor  v.  Manhattan  Ey. 
Co.    (1894),  143  N.  Y.  1,  37  N.  E. 
494;     Winget     v.     Building     Ass'n 
(1889),  128  111.  67,  21  N.  E.  12. 

67  Certain    of    the    cases    declare 
that  there  must  be  a  "substantial" 
compliance  with  the  formalities,  or 
a   compliance    in   all   "material  re- 
spects. ' '    Kaiser   v.   Lawrence   Sav- 
ings Bank   (1881),  56  Iowa  104,  8 


N.  W.  772,  41  Am.  Eep.  85, 
Mechem's  Gas.  16;  Mokelumne  Hill 
Mining  Co.  v.  Woodbury  (1859),  14 
Cal.  424,  73  Am.  Dec.  658;  Hurt  v. 
Salisbury  (1874),  55  Mo.  310;  Bige- 
low  v.  Gregory  (1874),  73  111.  197, 
Gilm.  Gas.  104.  But,  as  is  pointed 
out  in  Ee  Gibbs'  Estate  (1893),  157 
Pa.  59,  27  Atl.  383,  22  L.  E.  A.  276, 
"where  there  has  been  a  substantial 
compliance  with  the  law,  the  corpo- 
ration is,  of  course,  de  jure."  So, 
in  Finnegan  v.  Noerenberg  (1893), 
52  Minn.  239,  53  N.  W.  1150,  38 
Am.  St.  E.  552,  18  L.  E.  A.  778, 
Mechem  's  Cas.  13,  the  court  say : 
"A  substantial  compliance  will 
make  a  corporation  de  jure.  But 
there  must  be  an  apparent  attempt 
to  perfect  an  organization  under  the 
law.  There  being  such  an  apparent 
attempt  to  perfect  an  organization, 
the  failure  as  to  some  substantial 
requirement  will  prevent  the  body 
from  being  a  corporation  de  jure; 
but,  if  there  be  user  pursuant  to 
such  attempted  organization,  it  will 


25 


§23] 


LAW  OP  PARTNERSHIP 


not  insist  upon  more  than  that.  Less  than  that  high  degree  of 
compliance  which  constitutes  the  corporation  de^  jure,  is  that 
which  will  constitute  a  corporation  de  facto,  the  members  of 
which  are  not  liable  as  partners.  Just  what  degree  of  compli- 
ance is  necessary  to  create  a  corporation  de  facto,  is  not  easy 
to  state.  Some  courts  have  been  exceedingly  strict  in  their 
requirements.68  Others  have  been  more  liberal.69  Many  state- 
ments of  the  rule  have  been  attempted.  It  is  often  said  that 
"an  actual  an£  bona  fide  attempt"  will  suffice.  What  is  req- 
uisite, however,  is  a  colorable  or  apparent  attempt — something 
in  pursuance  of  the  scheme  of  the  statute  tending  to  give  pub- 
licity or  openness  to  the  claim  of  corporate  character.  They 
must  also  go  so  far  in  organizing  as  to  secure  to  the  corporation 
the  substance  of  assets,  subscriptions,  etc.,  which  it  would  have 
had  if  regular.  Perfect  articles  of  association  kept  in  the  pocket 
are  less  potent  in  creating  a  corporation  de  facto  than  much 
less  perfect  ones  duly  filed  or  recorded  as  the  statute  requires. 


not  prevent  it  being  a  corporation 
ae  facto."  The  statute  may,  how- 
ever, make  strict  compliance  with 
some  or  all  of  the  requirements  a 
condition  precedent  to  the  acquisi- 
tion of  any  corporate  power,  and  in 
such  cases  there  cannot  be  even  a  de 
facto  corporation  without  compli- 
ance. Jones  v.  Aspen  Hardware  Co. 
(1895),  21  Colo.  263,  40  Pac.  457,  29 
L.  B.  A.  143,  52  Am.  St.  E.  220. 
And  in  many  of  the  cases,  such  as 
those  first  cited  in  this  note,  express 
prohibitions  existed  against  com- 
mencing business  as  a  corporation 
until  certain  requirements,  like  the 
filing  of  the  articles,  were  complied 
with. 

68  See,  for  example,  Kaiser  v. 
Lawrence  Savings  Bank,  supra.  In 
the  judgment  of  the  present  writer, 
the  decision  in  this  case  is  indefen- 
sible. There  was  a  valid  statute, 
there  was  an  open,  "bona  fide,  at- 
tempt at  compliance,  and  there  was 


user.  The  defects  pointed  out  by 
the  court  were  formal  merely  and 
the  association  should  have  been 
held  to  be  at  least  a  de  facto  corpo- 
ration. See  also  Bigelow  v.  Greg- 
ory, supra;  Central  Nat.  Bank  v. 
Sheldon  (1912),  86  Kan.  460,  121 
Pac.  340.  In  Duke  v.  Taylor  (1896), 
37  Fla.  64,  19  So.  172,  53  Am.  St. 
E.  232,  31  L.  E.  A.  484,  the  failure 
to  organize  within  the  State  which 
granted  the  charter  was  held  fatal. 
See  also  Miller  v.  Ewer  (1847),  27 
Me.  509,  46  Am.  Dec.  619. 

69  See  Owensboro  Wagon  Co.  v. 
Bliss  (1901),  132  Ala.  253,  31  So. 
81,  90  Am.  St.  E.  907,  Mechem's 
Cas.  22;  Staver  &  Abbott  Mfg.  Co. 
v.  Blake  (1896),  111  Mich.  282,  69 
N.  W.  508,  38  L.  E.  A.  798,  Me- 
chem's Cas.  28,  Burd.  Cas.  649; 
Eutherford  v.  Hill  (1892),  22  Oreg. 
218,  29  Pac.  546,  29  Am.  St.  E. 
596,  17  L.  E.  A.  549,  Gilm.  Cas.  106. 


26 


DEFINITIONS  AND   DISTINCTIONS 


[§23 


The  one  defect  which  more  than  all  others  has  been  regarded 
as  fatal  is  that  of  a  failure  to  comply  with  the  statutory  scheme 
of  publicity.70  The  analogy  of  the  officer  de  facto^  who  must 
hold  by  some  color  of  right,  71  affords  assistance  here. 

It  is,  of  course,  possible  that  the  statute  may,  in  express  terms 
or  by  necessary  intendment,  make  other  acts  indispensable  to 
the  existence  of  any  kind  of  corporate  character,  and  in  such 
a  case  these  acts  also  must  be  done. 

If  a  corporation  de  facto  cannot  be  established,  then,  unless 
some  estoppel  or  other  bar  can  be  set  up,  the  members  of  the 
defective  corporation,  engaged  in  a  business  which  a  partner- 
ship might  conduct,  will  usually  be  held  liable  as  partners  for 
the  debts  of  the  concern,72  and  their  claims  between  them- 


70  See  Garnett  v.  Richardson 
(1879),  35  Ark.  144;  Abbott  v. 
Omaha  Smelting  Co.  (1876),  4  Neb. 
416;  Richardson  v.  Pitts  (1879),  71 
Mo.  128;  Guckert  v.  Hacke  (1893), 
159  Pa.  303,  28  Atl.  249,  Mechem's 
Partn.  Gas.  20;  New  York  Nat. 
Bank  v.  Crowell  (1896),  177  Pa. 
313,  35  Atl.  613;  Tonge  v.  Item 
Pub.  Co.  (1914),  244  Pa.  417,  91 
Atl.  229;  McLennan  v.  Hopkins 
(1895),  2  Kan.  App.  260,  41  Pac. 
1061,  Burd.  Gas.  41;  Harrill  v. 
Davis  (1909),  94  C.  C.  A.  47,  168 
Fed.  187,  22  L.  R.  A.  (N.  S.)  1153. 

Where  the  statute  required  the 
papers  to  be  "filed,  but  instead  of 
that  they  were  recorded  and  re- 
turned, held,  no  de  facto  corpora- 
tion. Bergeron  v.  Hobbs  (1897), 
96  Wis.  641,  71  N.  W.  1056. 

Where  the  papers  have  been  filed 
with  the  Secretary  of  State,  but  not 
recorded  with  the  County  Recorder 
as  required,  the  corporation  may 
still  be  one  de  facto;  Newcomb- 
Endicott  Co.  v.  Fee  (1911),  167 
Mich.  574,  133  N.  W.  540.  Same  in 
substance,  Doty  v.  Patterson 
(1900),  155  Ind.  60,  56  N.  E.  668; 


Bushnell  v.  Ice  Co.  (1891),  138  111. 
67,  27  N.  E.  596;  Tarbell  v.  Page 
(1860),  24  111.  46;  Vanneman  v. 
Young  (1890),  52  N.  J.  L.  403,  20 
Atl.  53.  Same,  where  certified  copy 
instead  of  a  duplicate  was  filed: 
Williamson  v.  Kokomo  B.  &  L. 
Ass'n  (1883),  89  Ind.  389. 

The  associates,  not  at  fault,  will 
not  usually  be  held  responsible  for 
the  failure  of  the  recorder  to  prop- 
erly file  or  record.  Compare  Owens- 
boro  Wagon  Co.  v%  Bliss  (1901),  132 
Ala.  253,  31  So.  81,  90  Am.  St.  R. 
907;  Mechem's  Partn.  Gas.  22; 
Henkel  v.  Heyman  (1878),  91  111. 
96,  Mechem's  Partn.  Gas.  709;  Man- 
hattan Co.  v.  Laimbeer  (1888),  108 
N.  Y.  578,  15  N.  E.  712,  Gilm.  Gas. 
615. 

71  See  Mechem  on  Public  Officers, 
§319. 

72  See,    for    examples,    Kaiser    v. 
Lawrence     Savings     Bank,     supra; 
Guekert  v.  Hacke,  supra;  Harrill  v. 
Davis,    supra;   Bergeron    v.    Hobbs, 
supra;   Abbott  v.   Omaha  Smelting 
Co.,  supra. 

So,  where,  though  articles  were 
filed,  nothing  further  was  done  in 


27 


24] 


LAW   OP   PARTNERSHIP 


selves  will,  usually  at  least,  be   settled  on  the  same  basis.73 
It  remains  to  consider  under  what  circumstances,  if  any,  an 
estoppel  or  other  bar  can  be  set  up. 

§  24.  Same  subject — The  effect  of  estoppel. — It  is  said  in  a 
great  variety  of  cases  that  a  person  who  has  dealt  with  a  pre- 
tended corporation  as  such  will  later  be  estopped  to  deny  that 
it  is  one  in  fact.74  This  statement  is  often  made  without  suffi- 
cient foundation  in  point  of  facts.  Estoppel  is  a  principle  of 
law  whereby  one  person  who  has  made  representations  of  fact 
to  another  in  order  to  induce  his  action  will  not  later  be  per- 
mitted, after  the  latter  has  acted  upon  the  representation,  to 
deny  it,  to  the  prejudice  of  the  one  who  has  so  been  induced 
to  change  his  position.  The  person  to  be  estopped  in  these  cases 
is  the  one  who  now  seeks  to  hold  the  associates  liable  as  part- 


the  way  of  organization,  the  incor- 
porators  were  held  personally  liable 
as  partners:  Central  Nat.  Bank  v. 
Sheldon  (1912%  86  Kan.  460,  121 
Pac.  340.  Same  in  substance:  Mc- 
Vicker  v.  Cone  (1891),  21  Oreg. 
353,  28  Pac.  76. 

So,  where  the  debts  were  incurred 
before  anything  had  been  3one  to- 
ward incorporation :  Harrill  v. 
Davis,  supra;  Queen  City  Furniture 
Co.  v.  Crawford  (1894),  127  Mo. 
356,  30  S.  W.  163;  Haslett  v. 
Wotherspoon  (1845),  2  Rich.  Eq. 
(S.  Car.)  395,  or  before  the  ar- 
ticles were  filed  or  published: 
Bigelow  v. -Gregory  (1874),  73  111. 
197,  Gilm.  Cas.  104  (but  held  not 
liable  in  such  a  case  where  the  con- 
tract was  expressly  made  on  ac- 
count of  the  corporation  and  was 
adopted  by  it  as  soon  as  the  organi- 
zation was  completed,  Whitney  v. 
Wyman  (1879),  101  U.  S.  392,  25 
L.  Ed.  1050). 

So  where  the  associates  did  not 
purport  to  organize  under  any 


statute:  Pettis  v.  Atkins  (1871),  60 
111.  454;  Forbes  v.  Whittemore 
(1896),  62  Ark.  229,  35  S.  W.  223. 

73  See,     e.     g.     Flagg     v.     Stowe 
(1877),   85   111.    164;    Rainwater   v. 
Childress  (1915),  121  Ark.  541,  182 
S.  W.  280. 

Compare      Doty      v.      Patterson 
(1900),  155  Ind.  60,  56  N.  E.  668. 

74  See,  for  example,  Greenville  v. 
Greenville  Co.  (1899),  125  Ala.  625, 
27  So.  764;  Plummer  v.  Struby  Co. 
(1896),  23  Colo.  IPO,  47  Pac.  294; 
Booske  v.  Ice  Co.    (1888),  24  Fla. 
550,  5  So.  247;  Petty  v.  Brunswick 
Ry.   Co.    (1899),   109    Ga.    666,    35 
S.  E.  82;   Winget  v.  Quincy  Bldg. 
Ass'n  (1889),  128  111.  67,  21  N.  E. 
12;  Stoutimore  v.  Clark  (1879),  70 
Mo.    471;     Nashua    Co.    v.    Moore 
(1874),  55  N.   H.  48;    Commercial 
Bank  v.  Pfeiffer  (1888),  108  N.  Y. 
242,  15  N.  E.  311;   Building  &  L. 
Ass'n  v.  Chamberlain   (1893),  4  S. 
Dak.  271,  56  N.  W.  897.     But  com- 
pare Loverin  v.  McLaughlin  (1896), 
161  111.  417,  44  N.  E.  99. 


28 


DEFINITIONS  AND  DISTINCTIONS  [§§25,26 

ners.  What  representation  of  fact  has  he  made  to  them?  Does 
he  represent  to  them  that  they  are  a  corporation,76  or  are  they 
ordinarily  the  ones  who  make  the  representation  to  him?  It 
may  be  said  that  his  representation  to  them  is  merely  that  he 
is  dealing  with  them  on  a  corporate  basis,  and  that  he  may  be 
estopped  to  deny  that  fact.  This  is  doubtless  what  is  ordinarily 
meant.  Even  so,  it  is  essential  that  he  shall  have  known  that 
they  pretended  to  be  a  corporation  and  were  purporting  to  deal 
with  him  on  that  basis  only.76  Where  the  representation,  more- 
over, is  not  one  of  fact  but  of  law — like  the  validity  of  the  stat- 
ute— estoppel  will  not  ordinarily  arise.77 

§  25.  The  difficulty  with  the  free  application  of  the  doc- 
trine of  estoppel  is  that,  by  means  of  it,  the  state  may  be  filled 
with  alleged  corporate  bodies  which  no  statute  has  authorized, 
but  which,  so  far  as  the  persons  dealing  with  them  are  con- 
cerned, the  courts  must  deal  with  as  though  they  had  a  valid 
existence.  Of  course,  this  estoppel  would  not  operate  against 
the  state  if  it  saw  fit  to  question  their  right  to  do  business ;  but 
state  officials  are  notoriously  slow  to  act  in  such  cases  unless 
somebody  strenuously  insists  upon  it. 

If  there  is  to  be  any  estoppel  as  to  the  fact  of  corporate  ex- 
istence in  these  cases,  it  ought,  as  a  matter  of  policy,  to  be  con- 
fined to  those  in  which  there  might  be  at  least  a  corporation 
de  facto,  i.  e.,  to  those  in  which  there  is  a  valid  statute  or  at  least 
a  statute  not  yet  declared  unconstitutional.  If  the  estoppel  be 
merely  as-  to  the  basis  of  liability,  a  statute  would  not  be  indis- 
pensable if  the  dealings  otherwise  showed  what  was  to  be  the 
nature  and  extent  of  the  liability. 

§  26.  Same  subject — The  doctrine  of  contractual  limitation. 

—It  is  sometimes  said  that,  instead  of  estoppel,  there  is  an  im- 
plied contract  between  the  parties  that  their  dealings  are  upon 
the  basis  of  a  liability  limited  to  the  associate  funds  and  exclud- 

75  See  Cottentin  v.  Meyer  (1910),          77  See  Ewart  on  Estoppel,  72  et 
80  N.  J.  L.  52,  76  Atl.  341.  seq. 

76  See,     for     example,     Eaton     v. 
Walker,  and  Guckert  v.  Hacke,  cited 
in  §§  22,  23  supra. 

29 


§§27,28]  LAW  OP  PARTNERSHIP 

ing  any  personal  liability.  That  contracts  of  this  sort  may  be 
expressly  made  is  not  to  be  denied;  and  an  implied  contract 
may  undoubtedly  also  exist.78  The  difficulty  here,  in  many 
cases,  is  to  find  the  foundation  of  facts  from  which  such  a  con- 
tract may  be  implied.  Neither  an  express  nor  an  implied 
contract  could  be  upheld,  if  to  do  so  would  violate  the  policy  of 
the  state. 

§  27.  Same  subject — The  doctrine  that  no  one  but  the  State 
may  raise  the  question. — Finally,  it  is  frequently  asserted  that 
the  question  of  the  legal  existence  of  a  body  purporting  to  be 
a  corporation  and  doing  business  as  such,  is  one  which  may 
be  raised  by  the  state  alone,  and  will  not  be  tried  collaterally 
in  suits  between  private  parties.  Where  the  body  in  question 
amounts  to  a  de  facto  corporation,  the  authorities  which  declare 
this  rule  are  very  numerous.79  It  is,  in  such  cases,  merely  a 
reflex  of  the  de  facto  doctrine.  It  will  be  found  most  frequently 
coupled  with  the  question  of  estoppel,  though,  as  has  been  seen, 
the  de  facto  corporation  does  not  depend  upon  estoppel.  It 
will  be  found  applied  in  some  cases  in  which  there  was  a  statute 
and  user  but  no  colorable  or  ostensible  attempt  to  comply  with 
the  statute  by  filing  or  recording  the  required  articles.  Such 
a  rule,  however,  could  have  little  or  no  application  to  a  case  in 
which,  for  the  lack  of  a  statute,  there  could  not  be  a  de  facto 
corporation,  i.  e.,  to  a  case  of  the  naked  assumption  of  corporate 
privileges. 

§28.  Same  subject — Rights  as  partners  in  such  cases. — Al- 
though the  question  usually  presents  itself  as  a  matter  of  the 

78  See  Staver  &  Abbott  Mfg.  Co.  (1890),  91  Ala.  224,  8  So.  658,  11  L. 
v.  Blake  (1896),  111  Mich.  282,  69  E.  A.  515,  24  Am.  St.  E.  887;  Van- 
N.  W.  508,  38  L.  E.  A.  798;   Me-  neman  v.  Young  (1890),  52  N.  J.  L. 
chem's    Gas.    28,    Burd.    Cas.    649;  403,   20   Atl.   53;    Higbie   v.   Aetna 
Frost    v.     Thompson     (1913),     219  B.  &  L.  Ass'n  (1910),  26  Okla.  327,  • 
Mass.  360,  106  N.  E.  1009.  109    Pae.    236,    Ann.    Cas.    1912  B, 

79  See    Imperial    Building    Co.    v.  223;    Brown    v.    Webb    (1912),    60 
Board    of    Trade    (1909),    238    111.  Oreg.  526,  120  Pac.  387,  Ann.  Cas. 
100,    87    N.    E.    167;    Marshall    v.  1914  A,  148;  Calor  Oil  Co.  v.  Fran- 
Keach  (1907),  227  111.  35,  81  N.  E.  zell  (1908),  128  Ky.  715,  109  S.  W. 
29,   118   Am.   St.   E.   247,    10   Ann.  328,  36  L.  E.  A.    (N.  S.)    456,  33 
Cas.  164;  Sniders'  Sons  Co.  v.  Troy  Ky.  Law  Eep.  98. 

30 


DEFINITIONS  AND   DISTINCTIONS  [§29 

liability  of  the  associates  as  partners,  the  correlative  question 
of  their  rights  as  such  in  similar  cases  may  also  arise.  In  a  case, 
often  cited,  in  which  the  associates  sued  as  a  corporation  for 
the  recovery  of  certain  property,  and  were  met  with  the  defence 
that  their  organization  as  a  corporation  was  too  defective  to 
permit  the  action  to  be  maintained,  the  court,  while  acceding 
to  this  view,  nevertheless  held  that  the  action  could  be  sustained 
as  one  by  a  partnership  doing  business  under  the  same  name. 
As  a  partnership  with  the  same  name  it  could  have  taken  title 
to  the  property  in  question;  the  associates  would  have  been 
liable  as  partners;  and  the  court  held  that  they  were  entitled 
to  the  advantages  which  would  be  accorded  to  a  similar  partner- 
ship.80 

§29.  Promoters  of  companies. — Promoters  of  corporations 
are  not,  as  such,  partners.  Though  engaged  in  endeavoring  to 
secure  the  organization  of  a  company  to  carry  on  business  for 
pecuniary  profit,  their  immediate  object  is  not  the  transaction 
of  business  for  mutual  gain,  and  they  do  not  fall  within  the 
definition  or  the  purposes  of  partnership.81 

Nevertheless,  if  they  carry  on  a  business  as  incident  to  the 
organization,  or  if  they  launch  and  conduct  the  business  before 
the  corporation  is  organized,  or  if  they  conduct  the  business 
without  ever  bringing  even  a  de  facto  corporation  into  existence, 
they  will  usually  be  liable  as  partners.82 

80  Bee  Jones  v.  Aspen  Hardware  81  See  Eeynell  v.  Lewis  (1846),  15 

Co.    (1895),   21   Colo.  263,  40   Pac.  Mees.  &  Welsby,  517;  Capper's  Case 

457,  52  Am.  St.  E.  220,  29  L.  E.  A.  (1851),  1  Sim.  (N.  S.)  178;  Batard 

143.     See  also  Smith  v.  Texas,  etc.  v.  Hawes  (1852),  2  Ellis  &  B.  287, 

E.   Co.    (1908),   101    Tex.   405,   108  Burd.    Gas.    33;    Eingolsky   v.   Min- 

S.   W.    819;    New  Haven  Wire   Co.  ing  Co.    (1914),   262   Mo.  241,  171 

Cases    (1889),    57   Conn.   352,   394;  S.   W.   56;    Long  v.   Citizens  Bank 

18  Atl.   266,  5  L.  E.  A.  300.     Cf.  (1892),  8  Utah   104,  29  Pac.  878; 

African  M.  E.   Church  v.  New  Or-  United  States  Wood  Preserv.  Co.  v. 

leans    (1860),    15    La.    Ann.    441;  Lawrence   (1915),  89  Conn.  633,  95 

Maugham  v.   Sharpe   (1864),   17  C.  Atl.  8. 

B.      (N.  S.)  443;    National  Shutter  82  See     Loverin     v.     McLaughlin 

Bar  Co.  v.  Zimmerman  (1909),  110  (1896),  161  111.  417,  44  N.  E.  99; 

Md.  313,  73  Atl.  19;  Byam  v.  Biek-  Nicholls  v.  Buell   (1909),  157  Mich, 

ford  (1885),  140  Mass.  31,  2  N.  E.  609,   122  N.   W.    217;    Eidenour   v. 

687.  Mayo   (1883),  40  Ohio  St.  9;   Bar- 

31 


§  30]  LAW  OP  PARTNERSHIP 

§  30.  Contemplated  partnerships. — A  mere  intention  to  form 
a  partnership  does  not  constitute  one.  Persons,  therefore,  who 
are  merely  contemplating  a  future  partnership,  or  who  have 
simply  entered  into  an  agreement  to  thereafter  become  partners, 
cannot  be  held  liable  as  partners,  nor  have  they  the  rights  of 
partners  as  between  themselves.83  Before  this  result  can  ensue 
the  executory  agreement  must  have  been  executed.  As  declared 
in  one  case,84  "A  marked  distinction  exists  in  law  between  an 
agreement  to  enter  into  the  copartnership  relation  at  a  future 
day  and  a  copartnership  actually  consummated.  It  is  an  ele- 
mentary principle  that  a  partnership  in  fact  cannot  be  predi- 
cated upon  an  agreement  to  enter  into  a  copartnership  at  a 
future  day  unless  it  be  shown  that  such  agreement  was  actually 
consummated.  In  the  language  of  the  text-books,  the  partner- 
ship must  be  'launched.'  To  constitute  the  relation,  therefore, 
the  agreement  between  the  parties  must  be  an  executed  agree- 
ment. So  long  as  it  remains  executory  the  partnership  is  in- 
choate, not  having  been  called  into  being  by  the  concerted  action 
necessary  under  the  partnership  agreement.  It  is  undoubtedly 
true  that  a  partnership  in  prcesenti  may  be  constituted  by  an 
agreement  if  it  appears  that  such  was  the  intention  of  the  par- 
ties. But  where  it  expressly  appears  that  the  arrangement  is 
contingent,  or  is  to  take  effect  at  a  future  day,  it  is  well  settled 

nett  v.  Lambert    (1846),   15  Mees.  117  Va.  616,  85  S.  E.  492;   Sabel 

&  Wels.  489;   Wechselberg  v.  Nat.  v.    Savannah    Bail    &    Equip.     Co. 

Bank    (1894),   12   C.  C.   A.    56,   64  (1903),   135  Ala.  380,  33   So.   663, 

Fed.  90,  26  L.  E.  A.  470.  Gilm.  Gas.  116. 

83  See  Atkins  v.  Hunt  (1843),  14  If,  in  such  a  case,  one  of  the  pro- 
N.  H.  205,  Mechem's  Cas.  79  (cit-  posed  partners  dies  before  the  part- 
ing Bourne  v.  Freeth,  9  Barn.  &  Or.  nership  is  launched,  it  will  not  come 
632;  Dickinson  v.  Valpy,  10  id.  128;  into  effect,  and  provisions  in  the 
Fox  v.  Clifton,  6  Bing.  776;  Howell  articles  as  to  the  effect  of  the  death 
v.  Brodie,  6  Bing.  N.  C.  44) ;  Dow  of  one  partner  will  not  apply  to 
v.  State  Bank  (1903),  88  Minn.  this  case.  Dow  v.  State  Bank,  supra. 
355,  93  N.  W.  121,  Gilm.  Cas.  87;  84Keed  v.  Meagher  (1890),  14 
Martin  v.  Baird  (1896),  175  Pa.  Colo.  335,  24  Pac.  681,  9  L.  E.  A. 
540,  34  Atl.  809,  Mechem's  Cas.  455.  See,  also,  Buzard  v.  McAnulty 
744,  Burd.  Cas.  34;  National  Bank  (1890),  77  Tex.  438,  14  S.  W.  138; 
v.  Cringan  (1895),  91  Va.  347,  21  Sabel  v.  Savannah  Bail  &  Equip. 
S.  E.  820;  Shield  v.  Adkins  (1915),  Co.,  supra. 

32 


DEFINITIONS  AND  DISTINCTIONS  [§§  31,  32 

that  the  relation  of  partners  does  not  exist,  and  that,  if  one  or 
more  of  them  refuse  to  perform  the  agreement,  there  is  no  rem- 
edy between  the  parties  except  a  suit  in  equity  for  specific  per- 
formance, or  an  action  at  law  for  the  recovery  of  damages, 
should  any  be  sustained." 

So  long  as  essential  terms  remain  undetermined,  there  can 
rarely  be  a  present  partnership.85 

§31.  Same  subject. — The  mere  time  of  executing  the  articles 
is  not  conclusive,  for  persons  may  become  partners  at  once,  if 
such  is  the  intention,  even  though  partnership  articles  are  there- 
after to  be  executed.  The  test  is  the  intention.  If  it  is  the 
intention  that  the  parties  are  not  to  become  partners  until  the 
terms  have  been  agreed  upon  and  articles  executed,  the  partner- 
ship will  not  come  into  existence  until  that  time,  unless  the 
condition  is  waived;  but  if  the  terms  have  been  agreed  upon, 
the  execution  of  the  articles,  or  the  performance  of  other  con- 
ditions, may  be  postponed  or  waived,  and  such  a  waiver  will 
often  be  presumed  where  the  parties  actually  begin  business  as 
partners  before  the  conditions  have  been  performed.86 

Such  a  waiver  is  much  more  likely  to  be  inferred  where  the 
rights  of  creditors,  who  have  reasonably  relied  upon  appearances 
of  an  actual  partnership,  are  concerned,  than  in  controversies 
between  the  parties  themselves.87  In  the  latter  case,  it  may 
often  be  shown  that  what  was  done  was  provisional,  tentative  or 
conditional  only  and  not  final.88 

§  32.  Classification  of  partnerships. — Partnerships  are  some- 
times classified  as  ordinary  partnerships,  limited  partnerships, 

85  See  Sabel  v.  Savannah  Eail  &  20  N.  W.  888,  Meehem's  Gas.  87; 
Equip.    Co.,    supra;    Latta    v.    Kil-  First   Nat.    Bank   v.    Cody    (1893), 
bourn    (1893),    150    U.    S.    524,    37  93  Ga.  127,  19  S.  E.  831;   Bopp  v. 
L.  Ed.  1169,  14  S.  Ct.  201,  Mechem's  Fox  (1872),  63  111.  540. 

Gas.  260,  Burd.  Gas.  503,  Gilm.  Gas.  87  See  Cain  Lumber  Co.  v.  Stand- 
425.  ard  Dry  Kiln  Co.  (1895),  108  Ala. 

86  Cook   v.   Carpenter    (1861),   34      346,  18  So.  882. 

Vt.    121,    80   Am.   Dec.   670;    Hart-          88  One  of  the  most  striking  cases 
man  v.  Woehr  (1867),  18  N.  J.  Eq.       of    this    sort    is    Martin    v.    Baird 
383;  Atkins  v.  Hunt  (1843),  14  N.       (1896),   175  Pa.   540,   34  Atl.   809, 
H.  205,  Mechem's  Gas.  79;  Kerrick      Mechem's  Gas.  744,  Burd.  Gas.  34. 
v.    Stevens    (1884),    55    Mich.    167, 

Mech.  Part.— 3  33 


§§  33,34]  LAW  OF  PARTNERSHIP 

and  joint-stock  companies.  The  peculiarities  of  the  latter  are 
separately  considered.  Ordinary  partnerships  may  be  divided, 
according  to  their  scope,  into  (1)  universal,  (2)  general,  and 
(3)  special  or  particular  partnerships, — a  classification  cor- 
responding to  that  of  agency,  and  based  upon  substantially  the 
same  distinctions.  An  universal  partnership  is  one  in  which  all 
the  property  and  services  of  the  parties  are  united,  and  all 
profits,  however  made,  are  for  their  joint  benefit.  A  general 
partnership  is  one  created  for  the  general  and  continuing  con- 
duct of  some  kind  of  business,  or  of  a  number  of  kinds  of  busi- 
ness. A  special  or  particular  partnership  is  one  created  for  a 
single  transaction  or  adventure. 

It  has  been  thought  that  an  universal  partnership  could  ex- 
ist only  in  theory,  but  several  cases  have  occurred  in  this  country 
of  partnerships  which  were  practically  universal.  In  any  event, 
however,  the  evidence  must  be  clear  to  establish  such  an  unusual 
relation.89 

§  33.  Ordinary  partnerships  may  also  be  divided,  ac- 
cording to  the  nature  of  their  business,  into  trading  and  non- 
trading  partnerships.  This  distinction,  which  is  made  quite 
important  in  many  states,  is  not  a  very  definite  or  satisfactory 
one.  The  common  basis  of  distinction  is  whether  the  partner- 
ship is  organized  to  buy  and  sell  as  a  business.  If  it  is,  it  is  a 
trading  partnership ;  otherwise  a  non-trading  partnership.  The 
chief  consequence  of  the  distinction  is  found  in  the  implied 
authority  of  the  partners.  The  subject  will  be  more  fully  con- 
sidered in  a  later  section.90 

§34.  Same  subject — Peculiar  forms  of  partnership. — In  ad- 
dition to  the  ordinary  and  typical  form  of  partnership,  there  are 
several  others,  more  or  less  anomalous,  which  have  been  already 
mentioned  but  whose  peculiarities  must  be  more  fully  pointed 
out.  Thus,  there  are — 

89  See  United  States  Bank  v.  Bin-  (1852),  14  How.  (U.  S.)  589;  Gray 

ney  (1828),  5  Mason  (U.  S.  C.  C.),  v.  Palmer  (1858),  9  Gal.  616;  Ham- 

183;    Lyman    v.    Lyman    (1829),   2  ilton  v.  Halpin  (1890),  68  Miss.  99, 

Paine    (U.    S.   C.   C.),   11;    Rice  v.  8  So.  739;  Gasely  v.  Society  (1862), 

Barnard     (1848),    20    Vt.    479,    50  13  Ohio  St.  144. 
Am.    Dec.    54 ;    Goesele   v.    Bimeler          90  See  post,  §  241. 

34 


DEFINITIONS  AND  DISTINCTIONS  [§35 

§35.  1.  Joint  stock  companies. — Joint  stock  companies, 

so  called,  as  has  already  been  seen,  are  usually  ordinary  partner- 
ships except  that,  by  the  original  contract  of  the  members,  the 
delectus  personarum  is  more  or  less  completely  waived,  and  it  is 
agreed  that  any  member  may  transfer  his  share,  with  or  without 
conditions  as  may  be  stipulated  in  the  articles,  and  that  his 
transferee  shall  accordingly  be  received  into  the  partnership. 
The  number  of  members  is  likely  to  be  greater  in  these  than  in 
ordinary  partnerships,  they  frequently  adopt  an  impersonal  or 
association  name  or  title,  and  the  conduct  of  affairs  is  more 
likely  to  be  delegated  by  all  the  partners  to  some  of  them  or 
to  designated  agents.  Aside  from  these  peculiarities,  the  ordi- 
nary rules  of  partnership  usually  apply.91  The  liability  of  an 
outgoing  partner  to  creditors  for  existing  debts  is  not  usually 
affected  by  the  agreements  for  transferring  shares ;  they  operate 
between  the  parties  only,  unless  the  creditors  have  assented  to 
them.92  The  liability  of  an  incoming  partner  to  existing  cred- 
itors in  these  partnerships  is  usually  the  same  as  in  ordinary 
partnerships.93  They  may  exist  without  statutory  authority,94 
though  in  a  number  of  states  they  have  been  regulated  or  pro- 
vided for  by  statute,  and  the  right  to  sue  in  the  firm  name  or 
in  the  name  of  one  of  the  officers  is  often  conferred.95  Many 
concerns  in  some  states,  and  several  of  the  great  express  com- 
panies, have  been  organized  as  joint  stock  companies.96 

91  See   Tappan  v.  Bailey   (1842),  (N.    S.)    665;     People    v.    Coleman 

4    Mete.    (Mass.)    529;     Tyrrell    v.  (1892),  133  N.  Y.  279,  31  N.  E.  96, 

Washburn   (1863),  6  Allen  (Mass.)  16   L.   R.   A.    183;    Great   Southern 

466;  Phillips  v.  Blatchford  (1884),  Hotel  Co.  v.  Jones   (1899),  177  IT. 

137    Mass.    510;    Farnum   v.   Patch  S.  449,  20  Sup.  Ct.  690,  44  L.  ed. 

(1880),  60  N.  H.  294,  49  Am.  Eep.  482. 

313;    Hodgson   v.   Baldwin    (1872),  92  See.      Tyrrell      v.      Washburn, 

65    111.    532;     Beaman    v.    Whitney  supra. 

(1841),    20    Me.    413;    Manning    v.  93  See  Powell  Co.  v.  Finn  (1902), 

Gasharie  (1866),  27  Ind.  399;  Car-  198  111.  567,  64  N.  E.  1036. 

ter    v.    McClure    (1897),    98    Tenn.  94  See     Phillips     v.     Blatchford, 

109,  38  S.  W.  585,  60  Am.  St.  E.  supra. 

842,  36  L.  E.  A.  282,  Burd.  Gas.  37,  95  See    references    to    the    statute 

Gilm.     Gas.     108;     Moore    v.    May  in  New  York,  in  People  v.  Coleman, 

(1903),  117  Wis.  192,  94  N.  W.  45;  supra. 

Spotswood    v.    Morris     (1906),    12  96  See    United    States    v.    Adams 

Idaho  360,  85  Pac.  1094,  6  L.  E.  A.  Express  Co.  (1912),  229  TJ.  S.  381r 

35 


i§36,37] 


LAW  OF  PARTNERSHIP 


§  36.  2.  Partnership  associations.— In  a  few  states,  stat- 
utes have  provided  for  what  are  called  partnership  associations, 
or  partnership  associations,  limited.  They  have  limited  liability, 
transferable  shares,  and  sue  and  deal  in  the  associate  name. 
They  are  more  like  corporations  than  partnerships,  and  some 
of  the  courts  have  held  them  to  be  corporations.97  Not  all  the 
courts,  however,  have  concurred  in  this  view,98  and  the  supreme 
court  of  the  United  States  has  denied  their  right  to  sue  as  cor- 
porations in  the  federal  courts.99 

§37.  -3.  Mining1  partnerships. — In  some  of  the  mining 

states,  though  not  in  all,  a  peculiar  form  of  partnership  has  been 
developed  in  mining  enterprises.  They  are  non-statutory,  and 
presumptively  arise,  without  express  agreement  to  that  effect, 
where  tenants  in  common  of  a  mining  property  proceed  to  de- 
velop and  operate  it  without  any  other  agreement.  Shares  are 
presumptively  transferable,  there  is  no  delectus  personarum, 
and  the  implied  authority  of  each  partner  is  limited  as  in  non- 
trading  partnerships.1  The  recognition  of  these  peculiar  mining 


57  L.  ed.  1237,  33  S.  Ct.  878;  Hibbs 
v.  Brown  (1907),  190  N.  Y.  167,  82 
N.  E.  1108. 

97  See    Bouse,    Hazard    &    Co.    v. 
Detroit  Cycle  Co.  (1896),  111  Mich. 
251,  69  N.  W.  511,  38  L.  E.  A.  794; 
Staver  &  Abbott  Mfg.  Co.  v.  Blake 
(1896),   111   Mich.   282,   69   N.  W. 
508,  38  L.  E.  A.  798,  Mechem's  Gas. 
28,  Burd.  Cas.  649. 

98  See  Edwards  v.  Warren  Lino- 
line  Works   (1897),  168  Mass.  564, 
47  N.  E.  502,  38  L.  E.  A.  791 ;  Car- 
ter  v.    Producers'   Oil   Co.    (1897), 
182  Pa.  551,  38  Atl.  571,  39  L.  E.  A. 
100. 

99  See   Great  Southern  Hotel  Co. 
v.   Jones,  supra. 

I  Mining  partnerships  have  been 
recognized  in  California,  Colorado, 
Idaho,  Kansas,  Montana,  Virginia, 
West  Virginia,  Wyoming,  but  not  in 
Pennsylvania.  See  Skillman  v. 


Lachman  (1863),  23  Cal.  198,  83 
Am.  Dec.  96  and  note:  Kahn  v. 
Smelting  Co.  (1880),  102  TJ.  S.  641, 
26  L.  ed.  266;  Read  v.  Meagher 
(1890),  14  Colo.  335,  24  Pac.  681, 
9  L.  E.  A.  455;  Haskins  v.  Curran 
(1895),  4  Idaho  573,  43  Pac.  559; 
Patrick  v.  Weston  (1895),  22  Colo. 
45,  43  Pac.  446;  Huston  v.  Cox 
(1918),  103  Kan.  73,  172  Pae.  992; 
Congdon  v.  Olds  (1896),  18  Mont. 
487,  46  Pac.  261;  Childers  v.  Neely 
(1899),  47  W.  Va.  70,  34  S.  E.  828, 
49  L.  E.  A.  468,  81  Am.  St.  E.  777, 
Mechem's  Cas.  34;  Lamar  v.  Hale 
(1884),  79  Va.  147;  Hartney  v. 
Gosling  (1902),  10  Wyo.  346,  68 
Pac.  1118,  98  Am.  St.  E.  1005.  See 
also  Judge  v.  Braswell  (1877),  76 
(13  Bush)  Ky.  67,  26  Am.  E.  185; 
Hotchkiss  v.  Quarry  Co.  (1889),  58 
Conn.  120,  19  Atl.  521. 


36 


DEFINITIONS  AND  DISTINCTIONS  [§§  38-40 

partnerships,  of  course,  does  not  preclude  the  organization  of  an 
ordinary  partnership  to  carry  on  mining  operations  if  the  par- 
ties so  agree.2 

§  38.  4.  Limited  partnerships.— These  are  purely  statu- 
tory creations,  having  some  partners  whose  powers  and  liabilities 
are  general  as  in  ordinary  partnerships,  and  some  partners  who 
take  no  part  in  the  management  and  whose  liability  is  limited 
to  the  amount  they  agree  to  contribute  to  the  capital.  Limited 
partnerships  are  separately  considered  in  a  later  chapter.8 

§39.  5.  Sub-partnerships. — What  is  sometimes  called  a 

sub-partnership  may  arise  where  one  partner  in  an  ordinary 
firm  unites  by  separate  agreement  to  share  his  interest  in  the 
firm  with  a  third  person  who  is  not  a  partner  in  the  firm.  This 
arrangement,  also,  is  separately  considered  in  a  later  section.4 

§  40.  Trust  or  partnership. — The  question  whether  the  bene- 
ficiaries of  the  modern  "business  trust"  can  be  deemed  to  be 
partners  has  arisen  in  a  number  of  cases.  In  one  of  the  most 
recent,6  it  is  said:  "A  declaration  of  trust  or  other  instrument 
providing  for  the  holding  of  property  by  trustees  for  the  benefit 
of  the  owners  of  assignable  certificates  representing  the  bene- 
ficial interest  in  the  property  may  create  a  trust  or  it  may  create 
a  partnership.  Whether  it  is  the  one  or  the  other  depends  upon 
the  way  in  which  the  trustees  are  to  conduct  the  affairs  com- 
mitted to  their  charge.  If  they  are  to  act  as  principals  and  are 
free  from  the  control  of  the  certificate  holders,  a  trust  is  created ; 
but  if  they  are  subject  to  the  control  of  the  certificate  holders, 
it  is  a  partnership." 

The  differences  between  the  partnership  and  the  trust  are 

2  See   Decker   v.    Howell  (1872),      gan  (1919),  233  Mass.  381,  124  N. 
42  Cal.  636.  E.  32.     Compare  Eice  v.  Kockefeller 

3  See  post,  Ch.  XXII.  (1892),    134  N.   Y.   174,   31   N.   E. 

4  See  post,  §  58.  907,  30  Am.  St.  E.  658,  17  L.  E.  A. 

5  See  Frost  v.   Thompson  (1913),       237. 

219    Mass.    360,    106    N.    E.    1009;  The  personal  liability  referred  to 

Sleeper  v.  Park  (1919),  232  Mass.  in  this  section  is  that  at  law  rather 
292,  122  N.  E.  315;  Horgan  v.  Mor-  than  in  equity. 

37 


§  41]  LAW  OF  PARTNERSHIP 

numerous.  The  most  important,  perhaps,  is  the  one  of  the  per- 
sonal liability  of  the  members  for  the  contracts  and  acts  of 
those  who  conduct  the  business.  They  would  not  usually  be  so 
liable  to  the  creditor  if  it  were  a  trust,  while  they  would  usually 
be  so  liable  if  it  were  a  partnership.  There  are  also  differences 
in  the  manner  of  conducting  the  business;  in  the  revocability 
of  the  arrangements  creating  the  relation ;  and  in  other  matters. 

§  41.  Classification  of  partners. — In  limited  partnerships  the 
partners  are  either  (1)  general,  or  (2)  special,  the  former 
standing  in  the  attitude  of  an  ordinary  partner,  and  the  latter 
occupying  a  peculiar  position,  prescribed  by  statute,  with  a 
liability  limited  to  his  contribution.6 

In  ordinary  partnerships,  partners  may  be  classified  as  (1) 
active  and  ostensible;  (2)  secret  or  dormant,  and  (3)  nominal. 

An  ostensible  partner,  sometimes  called  a  public  partner,  is 
one  who  is  held  out  and  known  as  a  partner.  An  active  partner 
is  one  who  actually  participates  in  the  conduct  of  the  business. 
He  is  usually  an  ostensible  one,  but  is  not  necessarily  so.  A 
partner  may  be  unknown  or  concealed  and  yet  active  in  the 
management  of  the  business;  or  he  may  be  both  concealed  and 
passive  as  to  the  conduct  of  the  business.  In  the  former  case 
he  is  said  to  be  a  secret  partner,  and  in  the  latter  case  he  is 
called  a  silent  or  dormant  partner.  A  nominal  partner  is  a  per- 
son apparently  a  partner  but  not  really  so.  A  person  who 
leaves  an  existing  firm  is  often  called  a  retiring  partner,  while 
one  who  enters  such  a  firm  is  called  an  incoming  partner. 

All  actual  partners  are  liable  for  the  debts  of  the  firm  incurred 
while  they  were  members  of  it,  whether  they  were  disclosed  as 
partners  or  not ;  but  a  really  dormant  partner  who  retires  from 
the  firm  is  not  required,  like  other  partners,  to  give  notice  of 
that  fact,  in  order  to  escape  liability  for  subsequent  indebted- 
ness.7 

6  See  post,  Chapter  XXII.  7  See  post,  §  397. 


38 


CHAPTER  II. 

FOR    WHAT    PURPOSES    A    PARTNERSHIP    MAY    BE    CREATED. 

§  42.  For  any  lawful  business.  §  45.  Purposes  illegal  in  part. 

43.  Series  of  acts,  continuous         46.  Effect  of  illegality. 

business,  single  adventure. 

44.  Not  for  purposes  unlawful  or 

opposed  to  public  policy. 

§42.  For  any  lawful  business. — It  is  the  general  rule, 
analogous  to  that  of  agency,  that  a  partnership  may  be  created 
for  the  purpose  of  carrying  on  any  lawful  business,  and  that 
whatever  business  the  individual  partners  might  lawfully  carry 
on  if  acting  separately  and  in  their  own  behalf,  they  may  law- 
fully conduct  in  partnership.  Thus,  there  may  be  a  partner- 
ship for  carrying  on  not  only  every  lawful  kind  of  trade  or  com- 
merce, but  also  for  farming,  mining,  lumbering,  manufacturing, 
transportation,  and  the  like.  Professional  occupations  like  that 
of  the  lawyer,  physician,  dentist  and  architect  may  also  be  car- 
ried on  in  partnership,  and  there  may  be  a  partnership  for  buy- 
ing and  selling  land.1 

1  Chester  v.  Dickerson   (1873),  54          To  carry  on  farming  operations: 

N.  Y.  1,  13  Am.  Rep.  550,  Mechem's  Wilson  v.  Todhunter  (1918)  —  Ark. 

Cas.  38,  Gilm.  Gas.  136;  Flower  v.  — ,  207  S.  W.  221. 
Barnekoff   (1890),  20  Oreg.  137,  25  "The  business  of  breeding,  train- 

Pac.  370,   11   L.  R.   A.  149;    Bates  ing,  and  racing  horses  for  purses  is 

v.  Babcock  (1892),  95  Gal.  479,  30  legal",  and  a  partnership  may  law- 

Pac.  605,  29  Am.  St.  R.  133,  16  L.  fully  be  created  for  that  purpose. 

R.  A.  745.  Central  Trust  Co.  v.  Respass  (1902), 

To  buy  and  sell  oil  leases,  options,  112  Ky.  606,  66  S.  W.  421,  23  Ky. 

etc.:    Ewers  v.  Montgomery  (1910),  L.  R.   1905,  99  Am.   St.  R.  317,  56 

68  W.  Va.  453,  69  S.  E.  907;  Bird  L.   R.   A.  479,  Mechem's   Cas.   728, 

v.    Wilcox    (1919),    104    Kan.    799,  Gilm.  Cas.  139;  but  not  for  betting 

180  Pac.  774.  on  horse  races  or  "book  making." — 

So,    of    coal    options:      McKinley  Id. 
v.  Lynch  (1905),  58  W.  Va.  44,  51 
S.  E.  4. 

39 


43] 


LAW   OF   PARTNERSHIP 


§43.  Same  subject — Series  of  acts — Continuous  business — 
Single  adventure. — Partnerships  are  undoubtedly  usually  or- 
ganized for  the  purpose  of  carrying  on  a  more  or  less  permanent 
and  continuing  trade  or  business;  but  it  is  well  settled  that 
there  may  be  a  partnership  for  a  single  piece  of  business  or  for 
a  particular  venture.2  The  early  forms  of  partnership  were 
frequently  such.  It  must,  however,  be  undertaken  as  a  business, 
to  distinguish  it  from  the  case,  for  example,  referred  to  in  a 
previous  section,8  wherein  two  persons,  not  otherwise  partners 
and  not  intending  to  embark  upon  the  business  of  buying  and 
selling  land,  unite  to  buy  a  particular  parcel  of  land  to  hold  for 
an  advance  in  price.  Thus,  for  example,  an  association  to  pur- 
chase a  tract  of  land  to  be  held  and  disposed  of  as  a  unit  in 
one  transaction  might  not  constitute  a  partnership,  while  an 


2  See  Kayser  v.  Maugham  (1885), 
8  Colo.  232,  6  Pac.  803  (contract  to 
unite  to  sell  a  particular  mine  at 
a  profit,  called  a  partnership) ; 
Shackelford  v.  Williams  (1913),  182 
Ala.  87,  62  So.  54  (same  in  sub- 
stance); Yeoman  v.  Lasley  (1883), 
40  Ohio  St.  190  (contract  to  buy  a 
particular  farm  supposed  to  contain 
coal,  to  be  resold  at  a  profit,  called 
a  partnership) ;  Hulett  v.  Fairbanks 
(1883),  40  Ohio  St.  233  (same  in 
substance);  Jones  v.  Davies  (1899), 
60  Kan.  309,  56  Pac.  484,  72  Am. 
St.  E.  354  (same  in  substance) ; 
Spencer  v.  Jones  (1899),  92  Tex. 
516,  50  S.  W.  118,  71  Am.  St.  E. 
870  (same  as  last) ;  Canada  v. 
Barksdale  (1881),  76  Va.  899  (same 
as  last) ;  Mitchell  v.  Tonkin  (1905), 
109  N.  Y.  App.  Div.  165,  95  N.  Y. 
S.  669  (called  a  partnership)  ;  Wil- 
liamson v.  Nigh  (1906),  58  W.  Va. 
629,  53  S.  E.  124;  Bates  v.  Babeock, 
supra;  Flower  v.  Barnekoff,  supra. 

But  see  Jones  v.  Gould  (1913), 
209  N.  Y.  419,  103  N.  E.  720  (simi- 
lar contract,  said  not  to  be  part- 


nership but  joint  venture) ;  Clark 
v.  Sidway  (1891),  142  U.  S.  682, 
12  S.  Ct.  327,  35  L.  ed.  1157  (said 
to  be  tenancy  in  common,  not  part- 
nership) ;  Gottschalk  v.  Smith 
(1895),  156  111.  377,  40  N.  E.  937 
(not  a  partnership) ;  Hurley  v. 
Walton  (1872),  63  111.  260  (single 
fishing  venture,  not  a  partnership) ; 
Williams  v.  Gillies  (1878),  75  N. 
Y.  197  (purchase  of  land  on  specu- 
lation not  a  commercial  partner- 
ship). Cases  of  limited  interests  in 
particular  transactions  held  not 
partnerships:  Butler  v.  Union  Trust 
Co.  (1918),  178  Cal.  195,  192  Pac. 
601;  Jackson  v.  Hooper  (1909), 
76  N.  J.  Eq.  185,  74  Atl.  130; 
Causten  v.  Barnette  (1908),  49 
Wash.  659,  96  Pac.  225;  Stundon 
v.  Dahlenberg  (1914),  184  Mo.  App. 
381,  171  S.  W.  37;  Sutton  v.  Mis- 
souri, etc.,  Ey.  Co.  (1919),  104  Kan. 
282,  178  Pae.  418. 

Co-tenants  rather  than  partners: 
Magee  v.  Magee  (1919),  —  Mass.  — , 
123  N.  E.  673. 

3  See  ante,  §  14. 


40 


FOR  WHAT  PURPOSES  CREATED  [§  44 

association  to  buy  such  a  tract,  subdivide  it  into  many  lots, 
employ  surveyors,  engineers  and  brokers,  and  enter  upon  the 
more  or  less  protracted  business  of  selling  out  the  various  lots 
at  retail,  might  easily  be  held  to  be  a  partnership.4 

§  44.  Not  for  purposes  unlawful  or  opposed  to  public  policy. 

— But,  as  in  the  case  of  agency,  there  are  many  purposes  for 
which  the  relation  cannot  lawfully  be  created.  Thus,  a  trust 
personal  to  one  individual  cannot  be  executed  by  a  partnership ; 
public  offices  cannot  be  held  in  partnership ;  and  a  partnership 
cannot  lawfully  be  created  for  the  doing  of  anything  which  is 
in  itself,  or  which  directly  and  immediately  tends  to  promote 
acts  which  are,  illegal,  immoral  or  opposed  to  public  policy. 
Partnerships,  therefore,  for  the  purpose  of  gambling  or  of 
carrying  on  a  gambling  establishment;  to  speculate  in  "fu- 
tures"; to  ''corner"  the  market,  or  to  stifle  or  prevent  com- 
petition ;  to  carry  on  a  forbidden  occupation ;  to  hinder  or  delay 
creditors;  to  carry  on  trade  with  belligerents  in  time  of  war; 
to  carry  on  trade  in  violation  of  the  navigation  laws ;  to  secure 
contracts  from  government  or  public  officials  by  improper 
means ;  to  corrupt  public  or  private  agents ;  to  carry  on  business 
without  a  license  where  that  is  necessary;  and  the  like,  are  il- 
legal.5 

4  So  held  in  Winstanley  v.  Drake  (1879),  14  Nev.  175,  33  Am. 

Gleyre  (1893),  146  111.  27,  34  N.  E.  Eep.  548;  Davis  v.  Gelhaus  (1886), 

628.  44  Ohio  St.  69,  4  N.  E.  593;  Hun- 

6  See  Woodworth  v.  Bennett  ter  v.  Pfeiffer  (1886),  108  Ind. 

(1870),  43  N.  Y.  273,  3  Am.  Eep.  197,  9  N.  E.  124;  Watson  v. 

706,  Mechem's  Cas.  43;  Craft  v.  Fletcher  (1850),  7  Gratt.  (Va.)  1; 

McConoughy  (1875),  79  111.  346,  Watson  v.  Murray  (1872),  23  N.  J. 

22  Am.    Eep.    171,    Mechem's    Cas.  Eq.  257;   King  v.  Winants    (1874), 
48;    Central    Trust    Co.   v.    Eespass  71    N.    C.    469,    17    Am.    Eep.    11; 
(1902),  112  Ky.  606,  66  S.  W.  421,  Citizen's  Bank  v.  Mitchell    (1909), 

23  Ky.  L.  E.  1905,  99  Am.  St.  E.  24  Okla.  488,  103  Pac.  720,  20  Ann. 
317,    56    L.    E.    A.    479,    Mechem's  Cas.    371;    Kennedy    v.    Lonabaugh 
Cas.  728,  Gilm.  Cas.  139;   Smith  v.  (1911),  19  Wyo.  352,  117  Pac.  1079; 
Eichmond   (1902),  114  Ky.  303,  70  Jackson     v.     Akron     Brick     Asa'n 
S.  W.  846,  102  Am.  St.  E.  283,  24  (1895),  53  Ohio  St.  303,  41  N.  E. 
Ky.  L.  E,  1117;  McMullen  v.  Hoff-  257,  53  Am.  St.  E.  638,  35  L.  E.  A. 
man  (1898),  174  U.  S.  639,  19  Sup.  287;   Patty- Joiner  Co.  v.  City  Bank 
Ct.  839,  43  L.  ed.  1117;  Gaston  v.  (1897),  15  Tex.  Civ.  App.  475,  41 

41 


§§  45,  46]  LAW  OF  PARTNERSHIP 

§45.  Purposes  illegal  in  part. — A  partnership  may  be  or- 
ganized for  two  or  more  purposes,  part  of  which  are  lawful 
and  part  of  which  are  unlawful,  or  it  may  be  created  for  a  law- 
ful purpose,  and  yet  one  or  more  of  its  undertakings  may  be 
illegal,  or  it  may  seek  to  accomplish  lawful  ends  by  unlawful 
means.  In  such  cases  the  lawful  part,  if  it  can  be  separated  from 
the  residue,  will  not  be  affected  by  the  illegality;  if  it  cannot 
be  separated,  the  whole  must  be  regarded  as  unlawful.6 

If  the  partnership  be  legal,  but  a  certain  transaction  is  illegal, 
and  the  latter  can  be  segregated,  it  alone  will  be  affected;  and 
the  rights  of  partners  who  were  not  implicated  will  not  be  de- 
stroyed.7 

§  46.  Effect  of  illegality. — Courts  will  not  enforce  contracts 
having  for  their  purpose,  or  tending  directly  to  promote,  illegal 
objects.  The  members  of  an  illegal  partnership  cannot  sue  to 
enforce  any  contract  tainted  by  the  illegality,  but  actions  may 
be  brought  against  the  members  of  such  a  partnership  by  a 
person  who  did  not  participate  in  the  illegality.  ,  As  between 
themselves,  the  law  usually  leaves  the  members  of  an  illegal 
partnership  where  it  finds  them,  refusing  to  aid  either  party. 
Courts  will  not,  therefore,  enforce  contribution  or  compel  an 
accounting  of  their  illegal  affairs ;  8  though  if  the  unlawful  trans- 
action is  completely  ended  and  there  remains  in  the  hands  of 

S.  W.  173,  Burd.  Gas.  484;  Wright  the  claim  was  not  only  illegal,  but 

v.  Cudahy    (1897),   168   111.  86,   48  the  illegality  was  such  that  it  must 

N.  E.  39;  Willson  v.  Morse  (1902),  or  ought  to  have  been  known,  to  the 

117  Iowa  581,  91  N.  W.  823.  partner  seeking  contribution,  to  have 

6  See  Dunham  v.  Presby    (1876),  been     illegal     when     it     was     com- 

120  Mass.  285;   Anderson  v.  Powell  mitted."    See  §188,  post;  Thwaites 

(1876),  44  Iowa,  20;  Foyer  v.  Har-  v.   Coulthwaite    [1896],  1   Ch.   496; 

ken    (1909),    142,    Iowa    708,    121  Keen  v.  Price  [1914],  2  Ch.  98. 
N.   W.   526,   23   L.  E,   A.    (N.    S.)  8  See    Central    Trust   Co.   v.    Ees- 

477;    Wishek  v.   Hammond    (1900),  pass    (1902),    112   Ky.    606,    66    S. 

10  N.  Dak.  72,  84  N.  W.  587. '  W.    421,    23    Ky.    L.    B.    1905,    99 

7 In  Estate  of  Eyan   (1914),  157  Am.  St.   E.  317,  56  L.  E.   A.  479, 

Wis.  576,  147  N.  W.  993,  the  court  Mechem's    Cas.    728;    McMullen    v. 

says  that,  as  between  the  partners,  Hoffman    (1898),    174    U.    S.    639, 

"a  claim  for  contribution  will  not  19    Sup.    Ct.   839,  43   L.    ed.   1117; 

be    rejected  unless   the    partnership  Hunter  v.  Pfeiffer  (1886),  108  Ind. 

is  an  illegal  partnership,  or  unless  197,   9  N.   E.   124;    Gould   v.   Ken- 

the  act   relied  on  as  the   basis   of  dall    (1884),   15   Neb.    549,    19   N. 

42 


FOR  WHAT  PURPOSES  CREATED 


[§46 


one  of  them  property  or  money  which,  but  for  the  past  illegal- 
ity, would  belong  to  both  of  them,  or  if  they  have  themselves 
wound  up  the  affairs  and  agreed  upon  the  account,  it  is  held  in 
some  cases  that  the  courts  will  then  compel  the  partner  having 
the  property  or  funds  in  his  possession  to  pay  over  to  his  part- 
ner the  latter 's  share,  even  though  such  property  or  funds  were 
acquired  in  unlawful  dealings.9  The  weight  of  authority,  how- 
ever, denies  relief  in  these  cases  as. well  as  in  the  others.10  The 
true  test  seems  to  be  whether  to  maintain  the  action  requires  the 
court  to  enforce  or  carry  out  the  illegal  contract.  If  it  will  so 
require,  the  court  will  decline  to  interfere, — not  because  of  any 
consideration  for^the  defendant,  but  because  the  court  will  not 
lend  its  ajd  or  be  a  party  to  the  illegal  transaction.11 

The  taint  of  illegality,  however,  does  not  follow  property  or 
money  forever,  and  where  even  ill-gotten  gains  have  been  in- 
vested in  a  new  and  lawful  enterprise  the  proceeds  of  it  may  be 
recovered.12 

The  illegality  of  the  transaction  need  not  be  pleaded:  courts 
will  take  notice  of  it  wherever  it  appears. 


W.  483;  Woodworth  v.  Bennett 
(1870),  43  N.  Y.  273,  3  Am.  Rep. 
706,  Mechem's  Partn.  Cas.  43; 
Read  v.  Smith  (1883),  60  Tex.  379; 
Wiggins  v.  Bisso  (1898),  92  Tex. 
219,  47  S.  W.  637,  71  Am.  St.  R. 
837;  Emery  v.  Candle  Co.  (1890), 
47  Ohio  St.  320,  24  N.  E.  660,  21 
Am.  St.  R.  819;  Morrison  v.  Ben- 
nett (1898),  20  Mont.  560,  52  Pac. 
553,  40  L.  R.  A.  158;  Craft  v.  Me- 
Conoughy  (1875),  79  111.  346,  22 
Am.  Rep.  171,  Mechem's  Cas.  48; 
Wright  v.  Cudahy  (1897),  168  111. 
86,  48  N.  E.  39;  and  other  cases 
cited  in  the  notes  to  §  44,  ante. 

^9  See  Brooks  v.  Martin  (1864),  2 
Wall.  (U.  S.)  70,  17  L.  ed.  732; 
Crescent  Ins.  Co.  v.  Bear  (1887), 
23  Fla.  50,  1  So.  318,  11  Am.  St. 
R.  331;  De  Leon  v.  Trevino  (1878), 
49  Tex.  88,  30  Am.  Rep.  101; 
Patty-Joiner"  Co.  v.  City  Bank 
(1897),  15  Tex.  Civ.  App.  475,  41 


S.  W.  173,  Burd.  Cas.  484;  Andrews 
v.  Brewing  Association  (1896),  74 
Miss.  362,  20  So.  837,  60  Am.  St. 
R.  509. 

10  See   Central  Trust   Co.  v.  Res- 
pass,  supra;  McMullen  v.  Hoffman, 
supra;  Sykes  .v.  Beadon  (1879),  11 
Ch.     Div.     170;     Snell    v.    Dwight 
(1876),   120    Mass.   9;    Jackson   v. 
McLean  (1889),  100  Mo.  130,  13  S. 
W.    393;     Woodworth    v.    Bennett, 
supra;   Hunter   v.    Pfeiffer,    supra; 
Craft  v.  McConoughy,  supra. 

11  See  MeMullen  v.  Hoffman,  su- 
pra; Central  Trust  Co.  v.  Respass, 
supra;   Woodworth   v.   Bennett,  su- 
pra. 

12  See     Armstrong     v.     American 
Exch.  Nat.  Bank  (1890),  133  U.  S. 
433,  10  Sup.  Ct.  450,  33  L.  ed.  747; 
King   v.    Winants,    supra;    Mitchell 
v.   Fish    (1911),   97   Ark.   444,   134 
S.    W.   940,   36   L.   R.   A.    (N.    S.) 
838. 


43 


CHAPTER  III. 

WHO  MAY  BE  PARTNERS. 

§  47.  In    general,    any   person  com-       §  54.  Firms  as  partners. 

petent   to    contract.  55.  Agent,  etc.,  as  partner. 

48.  Aliens   as   partners.  56.  How  many  partners  there  may 

49,  50.  Infants  as  partners.  be. 

51.  Insane  persons  as  partners.  57.  Of  the  delectus  personarum. 

52.  Married  women  as  partners.  58.  Of      ' '  sub-partnerships ' '      so- 

53.  Corporations  as  'partners.-  called.  ,  ' 

§47.  In  general,  any  person  competent  to  contract. — As  a 

general  rule,  any  person  may  be  a  partner  who  is  capable  of 
entering  into  contractual  relations.  If  he  has  the  legal  ability 
in  his  own  right  and  in  his  individual  capacity  to  transact  the 
business  contemplated,  he  may  usually  unite  with  another  per- 
son to  carry  on  that  business  in  partnership. 

This  being  the  general  rule,  it  is  unnecessary  to  pursue  it 
further  in  respect  of  normal  persons,  but  in  regard  to  those  who 
labor  under  some  general  disability,  more  particular  mention  is 
desirable.  Thus — 

§  48.  Aliens  as  partners. — Aliens  who  are  subjects  of  nations 
which  are  at  peace  with  each  other  may  enter  into  partnership, 
but  not  alien  enemies.  Upon  the  breaking  out  of  war  between 
their  respective  countries,  however,  their  capacity  to  act  as  part- 
ners is  ordinarily  terminated,  and  their  partnership,  as  will  be 
seen,  is  usually  suspended  if  not  dissolved.1 

§49.  Infants  as  partners. — An  infant  may  be  a  partner.2 
His  contract  of  partnership  and  his  contracts  as  a  partner  are 

1  See  post,  §  369.  Md.  53>  8  Atl.  664, 1  Am.  St.  R.  379, 

2  Bush    v.    Linthicum    (1882),    59  Mechem's  Gas.  51;  Dunton  v.  Brown 
Md.   344,  Mechem's  Gas.  55,  Burd.  (1875),    31    Mich.    182;    Osburn    v. 
Gas.  154;  Adams  v.  Beall  (1887),  67  Farr  (1879),  42  Mich.  134,  3  N.  W. 

44 


WHO    MAY   BE   PARTNERS 


[§49 


not  void,  but  they  are  voidable  at  his  option,  and  he  may  inter- 
pose his  infancy  as  a  defense  against  personal  liability  as  a  part- 
ner. During  the  continuance  of  the  relation,  however,  he  has 
all  of  the  rights  and  powers  of  a  partner.  Thus,  he  has  equal 
right,  with  his  copartner,  to  the  possession  of  the  assets  of  the 
firm ;  he  may  collect  and  pay  debts ;  and  may  make  contracts  in 
the  firm  name,  which,  though  he  may  repudiate  liability,  will 
be  binding  upon  his  adult  copartners  and  upon  the  partnership 
assets.8  He  is  entitled  to  an  accounting  and  to  his  share  of  the 
profits  like  other  partners. 

He  may  disaffirm  his  contract  of  partnership  and  avoid  per- 
sonal liability  as  a  partner  either  to  his  copartner*  or  third 
persons ; 6  but,  notwithstanding  such  disaffirmance,  it  is  held 
that  his  interest  in  the  partnership  property  remains  liable  to 


299.  He  may  be  the  general  part- 
ner in  a  limited  partnership:  Con- 
tinental National  Bank  v.  Strauss 
(1893),  137  N.  Y.  148,  553,  32  N.  E. 
B.  1066;  or  the  ostensible  partner  in 
a  nominal  partnership:  Codville 
Co.  v.  Smart  (1907),  15  Ont.  L.  Eep. 
357. 

Latrobe  v.  Dietrich  (1910),  114 
Md.  8,  78  Atl.  983;  Conary  v.  Saw- 
yer (1899),  92  Me.  463,  43  Atl.  27, 
69  Am.  St.  B.  525;  Moley  v.  Brine 
(1876),  120  Mass.  324;  Page  v. 
Morse  (1878),  128  Mass.  99;  Pelle- 
tier  v.  Couture  (1899),  148  Mass. 
269,  19  N.  E.  400,  1  L.  E.  A.  863; 
Yates  v.  Lyon  (1875),  61  N.  Y.  344. 

That  a  partnership  actually  ex- 
isted between  a  mother  and  her 
young  children  who  carried  on  a 
business  after  the  death  of  the 
father,  was  denied  in  Tuite  v.  Tuite 
(1907),  72  N.  J.  Eq.  740,  66  Atl. 
1090. 

3  See    Bush   v.    Linthicum,    supra, 
and   other   cases  cited   in   this   sec- 
tion. 

4  Thus  his  infancy  is  a  good  de- 
fense to  his  copartner's  action  for 


contribution.  Neal  v.  Berry  (1893), 
86  Me.  193,  29  Atl.  987.  Whether 
the  infant  may  disaffirm  a  partner- 
ship obligation  to  a  third  person 
without  also  repudiating  the  part- 
nership relation  itself  seems  to  be 
disputed.  It  is  held  that  he  may  do 
so,  in  Mehlhop  v.  Eae  (1894),  90 
Iowa  30,  57  N.  W.  650.  Miller  v. 
Sims  (1834),  2  Hill  (S.  C.),  479,  is 
contra. 

5  Bush  v.  Linthicum,  supra ;  Folds 
v.  Allardt  (1886),  35  Minn.  488,  26 
N.  W.  201;  Mehlhop  v.  Eae  (1894). 
90  Iowa,  30,  57  N.  W.  650;  Foot  v. 
Goldman  (1891),  68  Miss.  529,  10 
So.  62;  Bixler  v.  Kresge  (1895), 
169  Pa.  405,  32  Atl.  414,  47  Am.  St. 
E,  920,  Burd.  Gas.  115.  Although 
there  seems  to  be  some  difference  of 
opinion,  the  weight  of  authority  is 
to  the  effect  that  the  infant  may 
disaffirm  personal  contracts  and  con- 
tracts respecting  personal  property 
before  as  well  as  after  he  arrives  at 
maturity.  See  Adams  v.  Beall; 
Folds  v.  Allardt;  Dunton  v.  Brown, 
supra,  and  Shirk  v.  Shultz,  post. 


45 


§  50]  LAW  OF  PARTNERSHIP 

the  partnership  debts,  thus  creating  a  sort  of  non-statutory  lim- 
ited partnership,  with  the  infant  as  the  limited  partner.6  So 
if  he  has  paid  money  for  the  privilege  of  being  admitted  into 
the  business,  he  cannot,  it  is  held,  after  continuing  in  the  busi- 
ness for  a  period,  voluntarily  withdraw  and  recover  back  what 
he  has  paid,  unless  it  was  procured  from  him  by  fraud.7  Bank- 
ruptcy proceedings  may  be  maintained  against  the  firm  and  its 
assets,  though  no  decree  can  be  made  against  the  infant  part- 
ner personally.8  The  adult  partner  cannot  repudiate  firm  con- 
tracts made  by  the  infant  on  the  ground  of  the  latter 's  incapac- 
ity, but  if  he  has  been  induced  to  enter  into  the  partnership  by 
the  infant's  fraudulent  representation  that  he  is  of  age,  he  may 
dissolve  the  partnership  for  that  reason. 

§  50.  After  he  becomes  of  age,  the  infant  partner  may 

ratify  the  partnership  transactions  and  thus  become  liable  for  ob- 
ligations incurred  during  his  minority.  His  ratification  need  not 
be  express  unless  a  statute  so  requires,  but  may  be  inferred  from 
his  acts  and  conduct,  as  from  his  dealing  with  the  subject-matter 
of  the  contract  after  attaining  majority.  Whether  his  continu- 
ing to  act  as  a  partner  after  becoming  of  age  is  of  itself  enough 
to  constitute  ratification  has  been  doubted.9  In  actions  by  and 
against  the  partnership,  the  infant  partner  should  usually  be 
made  a  party,  though  the  English  and  many  of  the  American 
courts  have  held  it  improper  to  make  an  infant  partner  a  de- 
fendant in  an  action  against  the  firm.10 

BLovell    v.     Beauchamp     [1894],  v.  Keim  (1880),  83  N.  Y.  245,  Me- 

Ap.  Gas.  607,  Burd.  Gas.  155;  Bush  chem's  Gas.  737. 

v.     Linthicum,     supra;      Shirk     v.  8  See  In  re  Dunnigan   (1899),  95 

Shultz   (1887),  113  Ind.  571,  Gilm.  Fed.  428;  In  re  Duguid  (1900),  100 

Gas.  125;  Yates  v.  Lyon  (1874),  61  Fed.  274. 

N.    Y.    344 ;    Pelletier    v.    Couture  9  Upon    the    question    of   ratifica- 

(1889),   148   Mass.    269,   19   N.    E.  tion,  see  Salinas  v.  Bennett  (1890), 

400,  1  L.  E.  A.  863;  Conary  v.  Saw-  33  S.  Car.  285,  11  S.  E.  968;  Dana 

yer  (1899),  92  Me.  463,  43  Atl.  27,  v.  Stearns   (1849),  3  Gush.   (Mass.) 

69    Am.    St..  E.    525;    Hill   v.    Bell  372. 

(1892),  lll*Mo.  35,  19  S.  W.  959;  10 See  1  Chitty  on  Pleading,  pp. 

Gay  v.   Johnson    (1855),   32  N.  H.  14    and    50,    notes;    1    Lindley    on 

167.  Partn.  (2d  Am.  ed.,  Ewell),  74  and 

1  Adams  v.  Beall  (1887),  67  Md.  notes;    Osburn   v.   Farr    (1879),   42 

53,  8  Atl.  864,  1  Am.  St.  E.  379,  Me-  Mich.  134,  3  N.  W.  299. 
chem's  Gas.  51.     But  see   Sparman 

46 


WHO   MAY  BE   PARTNERS  [§§51,52 

§51.  Insane  persons  as  partners. — The  effect  of  insanity 
upon  capacity  to  become  a  partner  is  not  easy  to  state  briefly. 
Mental  unsoundness  is  of  many  forms,  arising  from  many  causes, 
and  existing  in  many  degrees.  It  may  be  obvious  or  it  may  be 
occult.  It  may  have  been  judicially  passed  upon,  or  it  may  still 
be  in  the  legally  debatable  stage.  All  that  can  be  briefly  said 
about  it  is  that  the  partnership  contract  of  an  insane  person, 
not  yet  judicially  determined  to  be  incompetent,  is,  like  his 
other  contracts,  usually  voidable  only  and  not  void;  and  if  the 
other  party  was  ignorant  of  the  insanity,  and  the  contract  has 
been  executed  and  appears  to  be  fair,  the  contract  of  an  insane 
person  will  not  be  set  aside  unless  the  parties  can  be  restored 
to  their  original  condition.11  After  an  adjudication  of  insanity, 
his  subsequent  contracts  are  usually  held  void.  An  adjudication 
of  insanity  before  he  entered  into  the  partnership  may  well  have 
a  different  effect  from  one  made  subsequently. 

§  52.  Married  women  as  partners. — At  common  law,  a  mar- 
ried woman  was  incapable  of  making  contracts,  except  where 
she  had  a  separate  estate  or  except  where  her  husband  was  a 
convicted  felon,  or  was  an  alien  enemy  and  abroad,  or  had 
abandoned  her,  or  when  husband  and  wife  were  judicially  sep- 
arated. Her  capacity  to  enter  into  partnership  was  subject  to 
the  same  limitations.  In  most  of  the  states  her  incapacity  to 
make  contracts  has  been  more  or  less  removed  by  statute,  and 
she  may  enter  into  partnership  with  persons  other  than  her 

11  See  Behrens  v.  McKenzie  Am.  Dec.  592,  2  Am.  Eep.  202; 
(1867),  23  Iowa  333,  92  Am.  Dec.  Carter  v.  Beckwith  (1891),  128  N. 
428;  Fay  v.  Burditt  (1882),  81  Tnd.  Y.  312,  28  N.  E.  582;  Blinn  v. 
433,  42  Am.  Eep.  142;  Jordan  v.  Schwarz  (1904),  177  N.  Y.  252,  69 
Kirkpatrick  (1911),  251  111.  116,  95  N.  E.  542,  101  Am.  St.  E.  806; 
N.  E.  1099;  Burnham  v.  Kidwell  Beams  v.  Taylor  (1906),  31  Utah 
(1885),  113  111.  425;  Gribben  v.  288,  87  Pac.  1089,  120  Am.  St.  E. 
Maxwell  (1885),  34  Kan.  8,  7  Pac.  930,  11  Ann.  Gas.  51,  8  L.  E.  A.  (N. 
584,  55  Am.  Eep.  233;  Gillet  v.  S.)  436;  McLaughlin  v.  Daily  Tele- 
Shaw  (1912),  117  Md.  508,  83  Atl.  graph  Co.  (1904),  1  Austral.  Com. 
394,  42  L.  E.  A.  (N.  S.)  87;  Mer-  L.  E.  243.  As  to  the  effect  of  sub- 
chant's  Nat.  Bank  v.  Coyle  (1919),  sequently  occurring  insanity  upon 
—  Minn.  — ,  174  N.  W.  309;  Young  the  partnership,  see  post,  §  365. 
v.  Stevens  (1868),  48  N.  H.  133,  97 

47 


52] 


LAW  OP  PARTNERSHIP 


husband  under  substantially  the  same  conditions  which  now 
apply  to  any  other  of  her  contracts.12  She  could  not,  at  common 
law,  be  a  partner  with  her  husband ;  and,  even  under  the  modern 
statutes,  the  same  disability  still  continues  in  many  states.13 
This  conclusion  is  based  sometimes  upon  the  insufficiency  of  the 
statutes  to  justify  it,  and  sometimes  upon  reasons  of  public 
policy  which  are  thought  to  forbid  such  business  relations  be- 
tween husband  and  wife.  A  number  of  states,  on  the  other 
hand,  deny  any  such  reasons  of  policy,  and  find,  in  the  broad 
terms  of  statutes  giving  the  married  woman  power  to  own  and 
control  property  and  to  make  contracts  generally  as  though  she 
were  unmarried,  ample  capacity  to  enter  into  partnership  rela- 
tions even  with  her  own  husband.14 


12 Vail  v.  Winterstein  (1892),  94 
Mich.  230,  53  N.  W.  932,  34  Am.  St. 
E.  334,  18  L.  E.  A.  515,  Mechem's 
Cas.  739.  Contra,  in  South  Caro- 
lina, Vannerson  v.  Cheatham  (1894), 
41  S.  Car.  327,  19  S.  E.  614.  The 
question  of  her  husband's  consent 
may  be  material.  It  is  required  by 
statute  in  Illinois.  See,  also,  San- 
ders v.  Schilling  (1909),  123  La. 
1009,  49  So.  689. 

13  See  Artman  v.  Ferguson 
(1888),  73  Mich.  146,  40  N.  W.  907, 
16  Am.  St.  B.  572,  2  L.  E.  A.  343; 
Mechem's  Cas.  61;  Gilkerson-Sloss 
Com.  Co.  v.  Salinger  (1892),  56  Ark. 
294,  19  S.  W.  747,  16  L.  E.  A.  526, 
35  Am.  St.  E.  105;  Seattle  Board  of 
Trade  v.  Hayden  (1892),  4  Wash. 
263,  30  Pac.  87,  16  L.  E.  A.  530,  31 
Am.  St.  E.  919;  Fuller  v.  McHenry 
(1892),  83  Wis.  573,  53  N.  W.  896, 
18  L.  E.  A.  512;  Bowker  v.  Brad- 
ford (1885),  140  Mass.  521,  5  N.  E. 
480;  Payne  v.  Thompson  (1886),  44 
Ohio  St.  192,  5  N.  E.  654;  Scarlett 
v.  Snodgrass  (1883),  92  Ind.  262; 
Carey  v.  Burruss  (1882),  20  W.  Va. 
571,  43  Am.  Eep.  790;  Mayer  v. 


Soyster  (1868),  30  Md.  402;  Bar- 
low v.  Parsons  (1901),  73  Conn.  696, 
49  Atl.  205;  Brown  v.  Chancellor 
(1884),  61  Tex.  437. 

14  See  Suau  v.  Gaffe  (1890),  122 
N.  Y.  308,  25  N.  E.  488,  9  L.  E.  A. 
593,  Mechem's  Cas.  64;  Louisville 
E.  Co.  v.  Alexander  (1894),  16  Ky. 
L.  E.  306,  27  S.  W.  981;  Belser  v. 
Tuscumbia  Banking  Co.  (1895),  105 
Ala.  514,  17  So.  40;  Dressel  v. 
Lonsdale  (1892),  46  111.  App.  454; 
Heyman  v.  Heyman  (1904),  210  111. 
524,  71  N.  E.  591;  Lane  v.  Bishop 
(1893),  65  Vt.  575,  27  Atl.  499.  In 
Tennessee,  see  Theus  v.  •  Dugger 
(1893),  93  Tenn.  41,  23  S.  W.  135. 
In  Maine,  see  Bird  Co.  v.  Hurley 
(1895),  87  Me.  579,  33  Atl.  164; 
Stewart  v.  Todd  (1919),  —  Iowa 
— ,  173  N.  W.  619;  Hoaglin  v.  Hen- 
derson (1903),  119  Iowa  720,  94 
N.  W.  247,  97  Am.  St.  E.  335,  61  L. 
E.  A.  756,  Gilm.  Cas.  121;  Morrison 
v.  Dickey  (1905),  122  Ga.  353,  50 
S.  E.  175,  69  L.  E.  A.  87;  Burney 
v.  Grocery  Co.  (1896),  98  Ga.  711, 
25  S.  E.  915,  58  Am.  St.  B.  342, 
Burd.  Cas.  11. 


48 


WHO   MAY  BE   PARTNERS 


[§§53,54 


Where  she  may  be  a  partner,  her  rights  and  liabilities  are  sub- 
stantially the  same  as  in  the  case  of  any  other  partner.15 

§  53.  Corporations  as  partners. — A  corporation  has,  as  such, 
under  the  ordinary  statute  which  confides  its  management  to 
its  own  officers  and  directors,  no  implied  power  to  enter  into 
partnership  either  with  an  individual,  a  firm,  or  another  cor- 
poration.16 Authority  for  this  purpose  must  be  expressly  con- 
ferred.17 But,  within  its  corporate  power,  a  corporation  and 
an  individual  may  so  contract  as  to  incur  a  joint  liability  with- 
out actually  entering  into  partnership.18 

§  54.  Firms  as  partners. — With  the  consent  of  their  mem- 
bers, two  or  more  firms  may  enter  into  partnership,  and  a  firm 


16  See  Burney  v.  Grocery  Co. 
supra,  and  other  cases  supra. 

16  See  Whittenton  Mills  v.  Upton 
(1858),  10  Gray  (Mass.),  582,  71 
Am.  Dec.  681,  Mechem's  Gas.  68; 
People  v.  Sugar  Eefining  Co.  (1890), 
121  N.  Y.  582,  24  N.  E.  834,  18  Am. 
St.  R.  843,  9  L.  R.  A.  33;  Gunn  v. 
Railroad  Co.  (1885),  74  Ga.  509; 
Hackett  v.  Multnomah  Ry.  (1885), 
12  Oreg.  124,  6  Pac.  659,  53  Am. 
Rep.  327;  Mallory  v.  Oil  Works 
(1888),  86  Tenn.  598,  8  S.  W.  396; 
Morris  Run  Coal  Co.  v.  Barclay  Coal 
Co.  (1871),  68  Pa.  St.  173,  8  Am. 
Rep.  159;  White  Star  Line  v.  Star 
Line  (1905),  141  Mich.  604,  105  N. 
W.  135,  113  Am.  St.  R.  551;  Geur- 
inck  v.  Alcott  (1902),  66  Ohio  St. 
94,  63  N.  E.  714;  Wilson  v.  Carter 
Oil  Co.  (1899),  46  W.  Va.  469,  33 
S.  E.  249.  Same,  '  as  to  national 
banks:  See  Merchants'  Nat.  Bank 
v.  Wehrmann  (1906),  202  TJ.  S.  295, 
26  S.  Ct.  613,  50  L.  ed.  1036;  Cali- 
fornia Bank  v.  Kennedy  (1896), 
167  U.  S.  362,  17  Sup.  Ct.  831,  42 
L.  ed.  198;  Merchants'  Nat.  Bank 
v.  Wehrmann  (1903),  69  Ohio  St. 
160,  68  N.  E.  1004,  Gilm.  Gas.  131. 
Mech.  Part. — 4 


17  Butler    v.    American    Toy    Co. 
(1878),  46  Conn.  136.    Many  chart- 
ers now  expressly  permit  it. 

18  In  Cleveland  Paper  Co.  v.  Cour- 
ier   Co.    (1887),    67   Mich.    152,   34 
N.  W.  556,  the  court  say:     "A  cor- 
poration may,  in  furtherance  of  the 
object  of  its  creation,  contract  with 
an  individual,  though  the  effect  of 
the  contract  may  be  to  impose  upon 
the  company  the  liability  of  a  part- 
ner. "      See,    also,    Boyd    v.    Amer. 
Carbon  Black  Co.    (1897),  182  Pa. 
206,  37  Atl.  937;   Sabine  Tram  Co. 
v.    Bancroft    (1897),    16    Tex.    Civ. 
App.  170,  40  S.  W.  837;   Bates  v. 
Coronado  Beach  Co.  (1895),  109  Cal. 
160,    41    Pac.    855;    Wallerstein    v. 
Ervin  (1901),  50  C.  C.  A.  129,  112 
Fed.    124;    Lehigh   Val.    R.    Co.    v. 
Dupont  (1904),  64  C.  C.  A.  478,  128 
Fed.    840;    Catskill    Bank    v.    Gray 
(1851),    14    Barb.     (N.    Y.)     471, 
Mechem's  Gas.  73.     See,  also,  as  to 
the  right  of  a  partnership  de  facto 
to    recover    on    obligations    due    it: 
French  v.  Donohue  (1882),  29  Minn. 
Ill,  12  N.  W.  354;  Wilson  v.  Carter 
Oil  Co.,  supra. 


49 


§  55]  LAW  OP  PARTNERSHIP 

may  also  enter  into  partnership  with  one  or  more  individuals. 
The  associating  firms  may  or  may  not  continue  to  carry  on  their 
original  and  separate  businesses.  As  respects  creditors  of  the 
joint  firm,  the  associating  firms  ordinarily  lose  their  separate 
identity,  and  each  member  of  each  firm  is  liable  as  a  partner  in 
the  joint  firm;  but  as  between  themselves,  for  the  purposes  of 
accounting  and  the  division  of  profits  or  losses,  the  respective 
firms  may  be  regarded  as  the  partners.19 

Where,  however,  one  of  the  associations  or  constituent  firms 
carries  on  a  separate  business,  it  will  be  so  far  regarded  as  an 
entity  as  that  creditors  of  the  joint  firm,  in  seeking  to  reach  the 
assets  of  the  constituent  firm,  will  be  postponed  until  the  cred- 
itors of  the  constituent  firm  are  satisfied.20 

Where  contracts  made  for  the  joint  firm  are  within  the  scope 
of  the  business  of  the  associating  firms,  the  contract  of  one  part- 
ner in  an  associating  firm  made  in  the  firm  name  will  bind  all 
of  the  partners  in  that  firm,  even  though  he  would  have  had  no 
authority  to  bind  such  copartners  as  individuals  in  their  in- 
dividual names.21 

§55.  Agent,  etc.,  as  partner. — An  agent,  trustee,  adminis- 
trator, and  the  like,  may  be  a  partner.  Unless  he  excluded  per- 
sonal liability  by  the  terms  of  the  contract,  he  would  usually 
be  individually  liable  for  the  partnership  debts,  though  he  would 
ordinarily  have  a  remedy  for  reimbursement  or  indemnity 
against  the  parties  by  whose  authority  and  on  whose  account  he 
acted  as  partner.22  In  accordance  with  familiar  rules,  the  dis- 

19 In  re  Hamilton  (1880),  1  Fed.  recognized    in    bankruptcy:    In    re 

800;    Simonton  v.   McLain    (1885),  Knowlton  (1912),  196  Fed.  837.    In 

37  La.  Ann.  663;   Bullock  v.  Hub-  Fordyce  v.  Shriver   (1886),  115  111. 

bard    (1863),  23   Cal.  495,  83  Am.  530,  5  N.  E.  87,  the  firm  was  made 

Dec.  130;  Meyer  v.  Krohn   (1885),  up  of  several  groups  or  parties  who 

114  111.  574,  2  N.  E.  495;  Meador  v.  were    not    already    partners.      The 

Hughes     (1879),     14    Bush     (Ky.)  members  of  one  group  are  not  liable 

652;    Raymond   v.   Putnam    (1862),  to  the  other  groups  for  the  neglig- 

44  N.  H.  160;  McLaughlin  v.  Mul-  ence  of  one  of  that  group, 

loy    (1897),   14  Utah  490,  47  Pac.  20  See  In  re  Gilbert,  supra. 

1031,  Burd.  Gas.  301 ;  In  re  Gilbert  21  See     McLaughlin     v.     Mulloy, 

(1896),  94  Wis.  108,  68  N.  W.  863.  supra. 

Identity    of    a    constituent    firm  22  See     Leckie     v.     Rothenbarger 

50 


WHO   MAY  BE   PARTNERS  [§§56,57 

closed  principal  of  an  agent  partner  would  usually,  on  the 
grounds  of  election,  not  be  liable  directly  to  creditors  of  the  firm, 
but  an  undisclosed  principal  would  ordinarily  be  so  liable. 

§56.  How  many  partners  there  may  be. — In  the  absence 
of  a  statute  fixing  the  limit,  the  partnership  may  be  composed 
of  any  number  of  partners,  though  there  must,  of  course,  be 
more  than  one.23  In  the  case  of  joint  stock  companies  and  other 
partnerships  with  transferable  shares,  the  partners  are  often 
very  numerous. 

§57.  Of  the  delectus  personanim. — Partnership  being 
founded  on  the  agreement  of  the  parties,  and  being  a  relation 
demanding  mutual  confidence  and  trust,  it  is  clear  that  a  per- 
son cannot  become  a  member  of  a  firm  without  the  consent  of 
the  other  members.  Hence,  one  partner  cannot  introduce  a 
third  person  into  the  firm  without  the  consent  of  the  others,24 
nor  upon  the  death  of  one  partner  can  his  personal  represen- 
tative, merely  by  virtue  of  any  provisions  of  the  will  or  the  con- 
sent or  desire  of  the  heirs  or  next  of  kin,  become  a  partner  with 
the  survivors,  except  with  their  consent.26  A  sale  of  one  part- 
ner's interest  does  not,  therefore,  make  his  transferee  a  part- 
ner, but  ordinarily  dissolves  the  firm.26 

Consent  to  the  admission  of  new  partners  or,  in  case  of  death, 
of  the  personal  representative,  may  be  given  in  advance,  as  by 
being  stipulated  for  in  the  partnership  articles.27 

To  the  rule  requiring  this  choice  of  persons  (delectus  per- 
sonarum)  there  are  two  exceptions — one  usually  statutory,  and 
the  other  customary,  viz.,  joint-stock  companies  and  mining 
partnerships.  In  these  a  transfer  of  one  partner's  share  or 

(1899),  82  Mo.  App.  615:     Morri-  72  N.  E.  1109,  104  Am.  St.  E.  225. 

son  v.  Dickey  (1905),  122  Ga.  353,  25  See  post,  §361;  Wild  v.  Daven- 

50  S.  E.  175,  69  L.  K.  A.  87.  port  (1886),  48  N.  J.  L.  129,  7  Atl. 

23  Stirling  v.   Heintzman    (1880),  295,  57  Am.  Eep.  552. 
42  Mich.  449,  4  N.  W.  165.  26  See  post,  §  359. 

24  Love  v.  Payne  (1880),  73  Ind.  27  See  Wild  v.  Davenport,  supra: 
SO,  38  Am.   Eep.  Ill;   Morrison  v.  McGrath  v.  Cowen  (1898),  57  Ohio 
Austin  Bank    (1905),  213   111.  472,  St.  385,  49  N.  E.  338. 

51 


§58] 


LAW   OF   PARTNERSHIP 


his  death  does  not  in  fact  operate  as  a  dissolution,  but  his  trans- 
feree or  representative  may  be  received  as  a  partner.28 

§58.  Of  "sub-partnerships,"  so-called. — One  or  more  of  the 
partners  of  a  firm  may  agree  with  a  third  person  to  share  with 
him  the  interest  of  such  partner  or  partners  in  the  firm.  Such 
a  relationship  is  frequently  called  a  sub-partnership,  and  the 
third  person  so  associating  with  the  partner  is  often  called  a 
sub-partner.  "A  sub-partnership,"  says  Mr.  Justice  Lindley,29 
"is,  as  it  were,  a  partnership  within  a  partnership;  it  presup- 
poses the  existence  of  a  partnership  to  which  it  is  itself  sub- 
ordinate." The  term  "sub-partnership,"  however,  is  a  mis- 
nomer. The  sub-partnership  carries  on  no  business;  the  sub- 
partner  has  none  of  the  authority  of  a  partner ;  he  does  not 
thereby  become  a  partner  in  the  original  firm,30  he  is  not  liable 
as  such  to  creditors  of  the  original  firm,31  and  he  has  no  right 
of  accounting,  as  a  partner  against  the  original  firm,  but  only 
against  such  members  of  it  as  united  with  him  to  form  the  sub- 
partnership.32 


28Kahn  v.  Smelting  Co.  (1880), 
102  U.  S.  641 ;  Skillman  v.  Lachman 
(1863),  23  Cal.  198,  83  Am.  Dec. 
96,  and  note;  Harris  v.  Lloyd 
(1891),  11  Mont.  590,  28  Pae.  736, 
28  Am.  St.  E.  475. 

29  Lindley  on  Partnership  (Ew- 
ell's  2d  Am.  ed.),  vol.  I,  p.  48. 

SOSetzer  v.  Beale  (1882),  19  W. 
Va.  274;  Meyer  v.  Krohn  (1885), 
114  111.  574,  2  N.  E.  495.  See  Miller 
v.  Eapp  (1893),  135  Ind.  614,  35 
N.  E.  963. 

31  Burnett  v.  Snyder  (1880),  81 
N.  Y.  550,  37  Am.  Eep.  527,  Me- 
chem's  Gas.  157,  Ames'  Gas.  128, 
Gilm.  Gas.  117;  Eiedeburg  v. 
Schmitt  (1888),  71  Wis.  644,  34  N. 
W.  336;  Setzer  v.  Beale  (1882),  19 
W.  Va.  274;  Morrison  v.  Dickey 
(1905),  122  Ga.  353,  50  S.  E.  175, 
69  L.  E.  A.  87.  Contra,  Fitch  v. 
Harrington  (1859),  13  Gray 


(Mass.),  468,  74  Am.  Dec.  641. 
32  The  sub-partner  may,  however, 
acquire  such  a  vested  interest  in  the 
assets  as  to  give  him  the  right  to  an 
accounting  upon  dissolution.  Nird- 
linger  v.  Bernheimer  (1892),  133  N. 
Y.  45,  30  N.  E.  561.  "A  sub-part- 
nership does  not  in  fact  exist  where 
one  party  furnishes  all  the  capital, 
receives  all  the  profits,  and  owns  all 
the  assets.  Such  an  arrangement 
lacks  all  the  essential  elements  of  a 
partnership.  The  ostensible  partner, 
in  such  case;  may  be  held  liable  to 
third  parties  on  the  ground  that  he 
has  held  himself  out  as  a  partner, 
and  they  have  treated  him  as  such; 
but  he  has  no  interest  which  will 
entitle  him  to  an  accounting,  or  to 
any  action  at  law  or  in  equity 
against  the  other  party. ' '  Webb  v. 
Johnson  (1893),  95  Mich.  325,  54 
N.  W.  947. 


52 


CHAPTER  IV. 

OF   THE    CONTKACT   OF  PARTNERSHIP   AND   THE   EVIDENCE 

THEREOF. 

§  59.  No    particular    formalities   re-       §  63.  When   the    contract    takes   ef- 


quired. 

60.  How  affected  by  the  statute  of 

frauds — Contracts  not  to  be 
performed  within  one  year. 

61.  Partnership  in  lands. 

61a.  Partnership  in  chattels. 

62.  Consideration  for  the  contract. 


feet. 

64.  Question    of   the   existence    of 

a  partnership  one  of  mixed 
law  and  fact. 

65.  Means  of  proof. 

66.  Burden  of  proof. 


§59.  No  particular  formalities  required. — No  particular 
formalities  are  required  in  entering  into  the  contract  of  part- 
nership. By  the  common  law,  no  official  act  or  ceremony  is 
necessary;  sealed  instruments  are  not  required,  and,  except  in 
those  cases  within  the  operation  of  the  statute  of  frauds,  a  writ- 
ten contract,  though  desirable,  is  not  essential. 

Express  agreement  is  not  necessary,  neither  is  it  essential 
that  the  parties  shall  have  had  a  conscious  intention  to  become 
partners.  The  relation  may  grow  out  of  transactions  and  deal- 
ings in  which  the  word  "partnership"  was  never  uttered;  if 
the  acts  or  contracts  of  the  parties  in  law  create  partnership, 
that  relation  will  ensue,  even  though  the  parties  did  not  have 
that  result  consciously  in  mind,  or  though  it  was  consciously  in 
their  intention  to  avoid  partnership.1  The  fact  that  they  de- 


ISee  Jacobs  v.  Shorey  (1868), 
48  N.  H.  100,  97  Am.  Dee.  586, 
Mechem's  Gas.  164;  Duryea  v. 
Whitcomb  (1858),  31  Vt.  395,  Me- 
chem's Cas.  89;  Townley  v.  Cricken- 
berger  (1908),  64  W.  Va.  379,  63 
S.  E.  320;  Wade  v.  Hornaday 
(1914),  92  Kan.  293,  140  Pac.  870; 
Johnson  v.  Carter  (1903),  120  Iowa 


355,  94  N.  W.  850,  Gilm.  Cas.  54. 

No  express  agreement  is  essential: 
Davis  v.  Davis  [1894]  1  Ch.  393, 
Burd.  Cas.  12. 

No  specific  intent  is  essential: 
Duryea  v.  Whitcomb,  supra;  Green 
v.  Beesley  (1835),  2  Bing.  N.  C. 
108,  Ames  Cas.  38,  Burd.  Cas.  20. 


53 


§  60]  LAW  OP  PARTNERSHIP 

clare  that  their  relationship  shall  not  be  a  partnership  will  not 
prevent  one  if  they  have  in  fact  created  such  a  relation.2  Sim- 
ilarly, on  the  other  hand,  the  fact  that  the  parties  call  their  rela- 
tion a  partnership  will  not  create  one  if  they  have  omitted  the 
essential  ingredients  of  partnership,3  though  it  may  be  strong 
evidence  of  their  intention.4 

Nevertheless,  courts  are  reluctant  to  "surprise  parties  into  a 
partnership."  As  is  said  in  one  case,6  " Every  doubtful  case 
must  be  solved  in  favor  of  their  intent;  otherwise  we  should 
'carry  the  doctrine  of  constructive  partnership  so  far  as  to 
render  it  a  trap  to  the  unwary.'  ' 

As  has  already  been  pointed  out,  greater  effect  may  be  given 
to  the  intention  of  the  parties  where  they  alone  are  involved, 
than  where  creditors  are  claiming  against  them  after  reasonably 
relying  on  the  appearances  of  partnership.6 

§  60.  How  affected  by  the  statute  of  frauds — Contracts  not 
to  be  performed  within  one  year. — Under  the  fourth  section  of 
the  statute  of  frauds,  an  agreement  to  form  a  partnership  in 
the  future,  which  by  its  terms  is  not  to  be  performed  within 
one  year,  or  an  agreement  for  a  present  partnership  to  con- 
tinue for  more  than  a  year  from  its  commencement,  is  void  if 
not  in  writing;  though,  in  either  case,  if  the  parties  have  acted 
upon  the  agreement  and  become  partners,  their  relation  will 
be  treated  as  a  partnership  at  will.7 

2  See       Adam      v.       Newbigging      man    (1909),  225  Pa.  200,  74  Atl. 
(1888),  13  App.  Cas.  308;   McDon-      54. 

aid   v.   Campbell    (1905),   96   Minn.  4 See  Huggins  v.  Huggins  (1902), 

87,  104  N.  W.  760;  Bestor  v.  Barker  117  Ga.  151,  43  S.  E.  759. 

(1894),  106  Ala.  240,  17  So.  389.  5  Beecher     v.    Bush     (1881),     45 

3  See  Sailors  v.  Nixon-Jones  Print-  Mich.    188,   7   N.   W.    785,   40   Am. 
ing   Co.    (1886),   20   111.   App.   509,  Eep.  465,  Mechem's  Cas.  118,  Gilm. 
Meehem's  Cas.  85.     Compare  Presi-  Cas.  49,  per  Cooley,  J.,  quoting  from 
dent,  etc.,  of  Adams  Bank  v.  Eice  Kent,    C.   J.,    in   Post  v.    Kimberly 
(1861),  2  Allen    (Mass.)   480,  with  (1812),  9  Johns.   (N.  Y.)  470,  504. 
Zuber  v.  Eoberts   (1906),  147  Ala.  6  See    Townley   v.    Crickenberger, 
512,  40  So.  319,  Gilm.  Cas.  7;  Brad-  supra. 

ley  v.  Ely  (1900),  24  Ind.  App.  7  See  Wahl  v.  Barnum  (1889), 
2,  56  N.  E.  44,  79  Am.  St.  E.  251,  116  N.  Y.  87,  22  N.  E.  280,  5  L.  E. 
Gilm.  Cas.  10;  Eosenblatt  v.  Wein-  A.  623;  Sanger  v.  French  (1898), 

54 


CONTRACT  OF  PARTNERSHIP — EVIDENCE 


[§61 


§61. 


Partnership  in  lands. — "With  respect  of  partner- 


ships in  lands,  there  is  some  conflict  as  to  the  application  of  the 
statute.  The  statute  requires  that  contracts  for  the  sale  of 
lands,  and  contracts  creating  interests  or  estates  in  land,  shall, 
subject  to  the  exceptions  named  therein,  be  evidenced  by  writ- 
ing. As  to  the  mere  creation  of  partnerships  to  deal  in  land 
in  the  future,  while  a  few  cases  deem  writing  necessary,  the 
great  weight  of  authority  is  to  the  effect  that  they  may  be  created 
without  writing.8  Such  contracts  are  neither  contracts  for  the 
sale  of  any  land  nor  do  they  create  interests  or  estates  in  any 
particular  lands.  That  question  will  only  arise  when  land  is 
thereafter  acquired.  If  a  valid  partnership  has  been  created, 
and  thereafter  partnership  funds  are  used  to  purchase  land,  the 
title  to  which  is  taken  in  one  partner,9  or  if  a  partner  in  such 
a  partnership  purchase  for  himself  land  which  it  was  his  duty 
to  purchase  for  the  partnership,  a  trust  may  be  established  upon 


157  N.  Y.  213,  51  N.  E.  979;  Mor- 
ris v.  Peckham  (1883),  51  Conn. 
128.  (But  see  Shropshire  v.  Adams 
(1905),  40  Tex.  Civ.  App.  339,  89 
S.  W.  448.) 

Such  a  partnership  exists  until 
something  is  done  to  dissolve  it: 
Sanger  v.  French,  supra,  and  rights 
created  by  acting  under  it  will  be 
enforced,  Hammel  v.  Feigh  (1919), 
-  Minn.  — ,  173  N.  W.  570. 

8  See  Bates  v.  Babcock  (1892),  95 
Cal.  479,  30  Pac.  605,  29  Am.  St. 
E.  133,  16  L.  E.  A.  745;  Chester 
v.  Dickerson  (1873),  54  N.  Y.  1, 
13  Am.  Bep.  550,  Meehem's  Gas. 
38,  Gilm.  Gas.  136;  Eichards  v. 
Grinnell  (1884),  63  Iowa  44,  18 
N.  W.  668,  50  Am.  Eep.  727;  Penny- 
backer  v.  Leary  (1884),  65  Iowa 
220,  21  N.  W.  575,  Gilm.  Cas.  214; 
Holmes  v.  McCray  (1875),  51  Ind. 
358,  19  Am.  Eep.  735;  Flower  v. 
Barnekoff  (1890),  20  Ore.  132;  25 
Pac.  370,  11  L.  E.  A.  149;  Garth 


v.  Davis  (1905),  120  Ky.  106,  85 
S.  W.  692,  27  Ky.  L.  E.  505,  117 
Am.  St.  E.  571;  Stitt  v.  Lumber 
Co.  (1906),  98  Minn.  52,  107  N. 
W.  824;  Morgart  v.  Smouse  (1906), 
103  Md.  463,  63  Atl.  1070,  115  Am. 
St.  E.  367,  7  Ann.  Cas.  1140;  Ham- 
mel v.  Feigh,  supra;  Thompson  v. 
McKee  (1914),  43  Okla.  243,  142 
Pac.  755,  L.  E.  A.  1915  A,  521; 
Howell  v.  Kelly  (1892),  149  Pa. 
473,  24  Atl.  224;  Beebe  v.  Olen- 
tine  (1911),  97  Ark.  390,  134  S.  W. 
936;  Marsh  v.  Davis  (1885),  33 
Kan.  326,  6  Pac.  612,  Gilm.  Cas. 
133;  Bird  v.  Wileox  (1919),  104 
Kan.  799,  180  Pac.  774  (partner- 
ship to  deal  in  oil  leases).  Contra: 
See  Huntington  v,,  Burdeau  (1912), 
149  Wis.  263,  135  N.  W.  845,  cit- 
ing Wisconsin  and  other  cases. 

9  See  Fairchild  v.  Fairchild 
(1876),  64  N.  Y.  471;  Tenney  v. 
Simpson  (1887),  37  Kan.  353,  15 
Pac.  187. 


55 


§§  61a,  62]  LAW  OP  PARTNERSHIP 

a  showing  of  the  facts  by  parol  evidence  notwithstanding  the 
statute.10 

On  the  other  hand,  if  D,  with  respect  of  land  which  he  al- 
ready owns,  agrees  without  writing  to  admit  P  to  a  partnership 
interest  in  it,  that  agreement  would  be  within  the  statute.11  So 
an  agreement  by  D,  there  being  no  existing  partnership  or 
partnership  funds,  to  purchase  land  with  his  own  funds  and 
when  bought  to  admit  P  to  a  partnership  therein,  is  equally 
within  the  statute.12 

§  61a. Partnership  in  chattels. — Somewhat  similar  ques- 
tions may  arise  with  respect  of  chattels,  though  much  less  fre- 
quently. A  contract  to  admit  another  to  partnership  in  respect 
of  chattels  already  owned,  or  to  acquire  chattels  and  convey  an 
interest  in  them  to  another,  may  fall  within  the  seventeenth 
section  of  the  statute  as  a  contract  for  the  sale  of  goods,  wares 
or  merchandise.13 

§62.  Consideration  for  the  contract. — As  has  been  already 
seen,  the  contract  of  partnership,  like  other  contracts,  requires 
to  be  founded  upon  some  consideration  in  order  to  be  binding.14 
Any  contribution  in  the  shape  of  capital  or  labor,  or  any  act 

10  See  Traphagen  v.  Burt  (1876),      75  Neb.   566,  110  N.  W.  669,   121 

67  N.    Y.    30;    Moritz    v.    Lavelle  Am.  St.  E.  822,  7  L.  B,  A.  (N.  S.) 
(1888),   77    Cal.    10,    18    Pac.    803,  945;    Wiley   v.   Wiley    (1911),    115 
11  Am.  St.  B.  229;   Miller  v.  Fer-  Md.    646,    81    Atl.    180,   Ann.    Gas. 
guson  (1907),  107  Va.  249,  57  S.  E.  1913  A,   789;    Bailey   v.    Hemenway 
649,  122  Am.   St.  B.  840,  13  Ann.  (1888),    147    Mass.   326,    17  N.   E. 
Cas.    138;    Floyd  v.   Duffy    (1910),  645;   Dunphy  v.  Eyan    (1885),  116 

68  W.  Va.  339,   69   S.   E.  993,   33  U.  S.  491,  29  L.  ed.  703,  6  S.  Ct. 
L.  E.  A.  (N.  S.)  883.  486;    Bobbins    v.    Kimball    (1892), 

11  See  Goldstein  v.  Nathan  (1895),  55  Ark.  414,  18  S.  W.  457,  29  Am. 
158   111.    641,   42   N.    E.    72,   Burd.  St.     B.     45;     Brosnan     v.     McKee 
Cas.  9;    Burgwyn  v.  Jones    (1912),  (1886),  63  Mich.  454,  30  N.  W.  107. 
113   Va.  511,  75  S.   E.   188,   Ann.          13  See  Lewin  v.  Stewart    (1858), 
Cas.     1913  E,    564,    41    L.    E.    A.  17  How.  Pr.    (N.  Y.)    5.'   Compare 
(N.   S.)    120;    McCormick's  Appeal  Coleman  v.  Eyre   (1871),  45  N.  Y. 
(1868),    57    Pa.    54,    98    Am.    Dec.  38,  Gilm.  Cas.  137. 

191;    Miller   v.   Miller    (1913),   156          14  See       Mitchell       v.       O'Neale 
Ky.  267,  160  S.  W.  923.  (1869),  4  Nev.  504. 

12  See    Norton    v.    Brink    (1906), 

56 


CONTRACT  OF  PARTNERSHIP — EVIDENCE  [§63 

which  may  result  in  liability  to  third  persons,  is  sufficient  for 
the  purpose.16  The  mutual  covenants  and  contributions  of  the 
parties  are  the  usual  consideration.  Their  contributions  need 
not,  of  course,  be  equal,  for  the  members  must  be  their  own 
judges  of  the  adequacy  of  the  consideration.  Neither  is  it  nec- 
essary, as  between  the  parties  themselves,  that  the  losses  shall 
be  shared  equally  or  at  all ;  for,  as  will  be  seen,16  one  partner 
may  lawfully  agree  to  indemnify  the  other  against  loss  by  the 
enterprise. 

§  63.  When  the  contract  takes  effect. — As  has  been  already 
seen,17  a  mere  intention  to  form  a  partnership  does  not  create 
one;  that  intention  must  in  some  way  be  given  legal  operation. 
It  is  not,  of  course,  essential  that  formal  instruments  shall  be 
executed,  and  it  may  be  found  to  have  been  the  intention  of 
the  parties  to  launch  the  partnership  at  once,  notwithstanding 
the  fact  that  regular  partnership  articles  are  afterwards  to  be 
prepared.18 

Well-drawn  partnership  articles  will  name  the  day  upon  which 
the,  partnership  is  to  begin ;  but  in  the  absence  of  such  a  stipula- 
tion, or  of  any  articles  whatever,  recourse  must  be  had  to  other 
evidence.  Presumptively  in  such  cases  the  date  of  the  com- 
mencement will  be  the  day  on  which  the  agreement  is  fully  and 
definitely  consummated ; 19  but  the  express  stipulation  of  the 
parties,  or  the  circumstances  attending  the  case,  may  show  either 
that  the  partnership  is  to  have  a  retroactive  operation,  or  that 
it  is  not  to  be  deemed  to  be  in  force  until  some  event  has  hap- 
pened or  some  precedent  condition  has  been  complied  with.20 

ISLindley     on    Partnership     (2d  S.  524,  37  L.  ed.  1169,  14  Sup.  Ct. 

Am.  ed.,  Ewell),  63.  201,  Mechem's  Gas.  260,  Burd.  Gas. 

16  See  post,  §  81.  503,     Gilm.     Gas.     425;     Sabel     v. 

17  See  ante,  §§  30,  31.  Savannah  Rail  &  Equip.  Co.  (1903), 

18  See  ante,  §  31.  135  Ala.  380,  33  So.  663,  Gilm.  Gas. 

19  See  Guiee  v.  Thornton  (1884),  116;    Queen    City  Furniture    Co.   v. 
76  Ala.  466.  Crawford    (1895),  127  Mo.  356,  30 

20  See   Eeed  v.   Meagher   (1890),  S.  W.  163. 

14  Colo.  335,  24  Pac.  681,  9  L.  E.  Where   there  was  no   element   of 

A.  455;   National  Bank  v.   Cringan  estoppel,   plaintiff   was   not   respon- 

(1895),  91  Va.  347,  21  S.  E.  820;  sible    for    the    acts    of    an    alleged 

Latta  v.  Kilbourn    (1893),   150   U.  partner,  where  the  latter  was  a  per- 

57 


64] 


LAW  OF  PARTNERSHIP 


Conditions  of  the  latter  sort,  however,  may  be  waived,  and,  as  to 
third  persons  especially,  will  usually  be  held  to  be  so  where  the 
partnership  is  actually  launched  before  the  contemplated  time 
arrives.21  So,  also,  where  the  arrangement  contemplates  action 
at  once  and  continuously,  a  present  partnership  may  exist, 
though  some  incidents  remain  to  be  agreed  upon  later.22 

§  64.  Question  of  the  existence  of  a  partnership  usually  one 
of  mixed  law  and  fact. — The  question  whether  a  partnership 
exists  in  a  given  case  is  one  of  mixed  law  and  fact.  What  con- 
stitutes a  partnership  is  a  question  of  law ;  whether  in  the  given 
case  such  facts  exist  as  in  law  constitute  a  partnership  is  a  ques- 
tion of  fact.  If  the  facts  are  not  admitted,  or  if  more  than  one 
inference  may  reasonably  be  drawn  from  them,  the  case  will 
go  to  the  jury ;  if  the  facts  are  admitted,  and  only  one  inference 
may  reasonably  be  drawn  from  them,  the  court  will  decide  the 
question.23  Whether  a  written  instrument  produced  creates  a 
partnership  is  a  question  of  construction  for  the  court.24 


son  who  was  to  have  a  share  in 
plaintiff's  venture  upon  paying  for 
it,  and  who  had  given  a  check  for 
it,  not  accepted  as  payment,  which 
proved  to  be  worthless:  Stundon  v. 
Dahlenberg  (1914),  184  Mo.  App. 
381,  171  S.  W.  37. 

21  See    First    National    Bank    v. 
Cody  (1893),  93  Ga.  127,  19  S.  E. 
831. 

For  a  striking  case  in  which,  as 
between  the  parties,  no  partner- 
ship was  deemed  to  have  been  cre- 
ated, though  many  preliminary 
steps  had  been  taken,  see  Martin 
v.  Baird  (1896),  175  Pa.  540,  34 
Atl.  809,  Mechem's  Gas.  744. 

For  an  interesting  case  as  to 
whether  certain  parties  ever  signed 
the  articles  or  not,  see  Moore  v. 
May  (1903),  117  Wis.  192,  94  N. 
W.  45. 

22  See  Kerrick  v.  Stevens  (1884), 


55   Mich.   167,   20  N.  W.   888,  Me- 
chem's Gas.  87. 

A  provision  in  a  contract,  other- 
wise of  present  partnership,  that 
if  the  venture  is  not  a  success  one 
party  may  declare  the  agreement 
of  no  effect,  does  not  prevent  a 
present  partnership  from  arising: 
Illinois  Malleable  Iron  Co.  v.  Eeed 
(1897),  102  Iowa  538,  71  N.  W. 
423. 

23  See  Morgan  v.  Farrel    (1889), 
58  Conn.  413,  20  Atl.  614,  18  Am. 
St.   E.    282,   Mechem's   Partn.   Gas. 
171;    Everitt    v.    Chapman    (1827), 
6  Conn.  347,  Gilm.  Gas.  68;    Wag- 
goner  v.  First   Nat.   Bank    (1894), 
43  Neb.  84,  61  N.  W.  112;   Kings- 
bury    v.    Tharp    (1886),    61    Mich. 
216,  28  N.  W.  94;  Stundon  v.  Dahl- 
enberg   (1914),   184  Mo.  App.  381, 
171  S.  W.  37. 

24  See    Boston    Smelting    Co.    v. 


58 


CONTRACT  OF  PARTNERSHIP — EVIDENCE  [§  65 

In  the  ordinary  disputed  case,  the  course  of  procedure  will 
be  for  the  court  to  instruct  the  jury  as  to  the  considerations 
which  determine  partnership  and  the  facts  which  they  must 
find  in  order  to  establish  one,  and  then  to  leave  the  whole  ques- 
tion of  the  existence  of  a  partnership  and  the  resulting  liability 
to  their  determination. 

§65.  Means  of  proof. — As  between  the  alleged  partners 
themselves,  the  existence  of  the  partnership  may  be  proved  by 
the  partnership  articles,  if  any;  if  not,  by  informal  writings, 
letters,  the  partnership  books,  the  conduct  and  admissions  of 
the  parties,  or  by  any  other  matters  tending  to  prove  the  fact 
in  controversy,  and  brought  home  to  the  party  to  be  charged.26 

As  to  third  persons,  the  existence  of  the  partnership  and  the 
persons  who  compose  it  may  be  proved  by  conduct,  admissions 
or  other  kinds  of  parol  evidence,  even  though  there  were  part- 
nership articles.26 

The  testimony  of  the  parties  themselves  as  to  the  facts  is, 
under  modern  rules,  admissible  either  to  prove  or  disprove  the 
alleged  partnership.27 

It  may  also  be  proved  by  the  conduct  or  admissions  of  the 
parties  sought  to  be  charged ; 28  but  the  acts  or  admissions  of 

Smith  (1880),  13  E.  I.  27,  43  Am.  ell's  2d  Am.  ed.),  87;   2  Greenleaf, 

Eep.      3 ;      Klosterman     v.     Hayes  §  479. 

(1889),  17  Oreg.  325,  20  Pac.  426;  27 First  National  Bank  v.  Conway 

Webster   v.    Clark    (1894),   34   Fla.  (1886),  67  Wis.  210,  30  N.  W.  215. 

637,  16  So.  601,  43  Am.  St.  E.  217,  Their  testimony  as   to  the   facts 

27   L.    E.   A.    126;    Eider   v.   Ham-  is   competent  but   their   conclusions 

mell   (1901),  63  Kan.  733,  66  Pac.  as  to  whether  there  was  a  partner- 

1026;    Bradley   v.    Ely    (1900),    24  ship  are  not  conclusive.     Wilson  v. 

Ind.  App.  2,  56  N.  E.  44,  79  Am.  Todhunter  (1918),  —  Ark.  — ,  207 

St.  E.  251,  Gilm.  Gas.  10;McAlpine  S.  W.  221. 

v.    Millen    (1908),    104   Minn.    289,  28Eeed    v.    Cremer     (1886),    111 

116  N.  W.  583.  Pa.  482,  5  Atl.  237,   56  Am.   Eep. 

25  See   2    Greenleaf   on   Evidence,  295,  where  it  is  said  that  the  part- 
§  477  et  seq.;  Lindley  on  Partner-  nership  may  be  established  by  the 
ship    (Ewell's  2d  Am.  ed.),  vol.   I,  several  admissions  o'f  all  those  who 
p.  80  et  seq.;  McMullan  v.  Macken-  were   alleged  to   compose  it,   or  by 
zie    (1849),  2  Greene    (Iowa),  368.  the  admissions  of  one  and  the  acts 

26  1  Lindley  on  Partnership  (Ew-  and  declarations  of  the  others.    But 

59 


§66] 


LAW   OP   PARTNERSHIP 


one  person  are  not  admissible  to  prove  another  to  be  a  part- 
ner, unless  the  latter  is  in  some  way  shown  to  be  responsible 
for  them  or  to  have  acquiesced  in  them.29  The  existence  of 
the  partnership,  or  who  were  the  persons  composing  it,  cannot 
be  proved  by  general  reputation,  rumor  or  hearsay.30 

In  seeking  to  establish  partnership  from  acts  and  conduct, 
a  wide  range  of  evidence  is  allowed  to  put  before  the  jury  all 
the  facts  and  circumstances  relating  to  the  connection  of  the 
alleged  partner  with  the  affair,  and  the  method  of  transacting 
the  business. 

§  66.  Burden  of  proof. — The  burden  ,of  proving  the  existence 
of  the  partnership  and  who  were  the  partners  composing  it 
rests  usually  upon  the  party  alleging  it.81  Where,  however,  its 
existence  is  shown  or  admitted,  a  presumption  of  its  continu- 
ance ordinarily  arises  which  casts  upon  the  party  alleging  its 
termination  the  burden  of  showing  that  fact,  including  the  giv- 
ing of  proper  notice  where  that  is  necessary.32 


the  facts  relied  upon  must  be  those 
which  the  party  sought  to  be  held 
caused  or  permitted  to  appear. 
Morgan  v.  Farrel  (1890),  58  Conn. 
413,  20  Atl.  614,  18  Am.  St.  E. 
282,  Mechem's  Gas.  171.  See,  also, 
Boosalis  v.  Stevenson  (1895),  62 
Minn.  193,  64  N.  W.  380;  McDon- 
ald v.  Campbell  (1905),  96  Minn. 
87,  104  N.  W.  760. 

29  The  declarations  or  admissions 
of  one  person  that  another  is  his 
partner  are  not  admissible  to  prove 
that  fact  against  the  latter  person, 
unless  he  has  in  some  way  author- 
ized or  assented  to  such  declara- 
tions. Vanderhurst  v.  De  Witt 
(1892),  95  Cal.  57,  30  Pac.  94,  20 
L.  E.  A.  595;  Button  v.  Woodman 
(1852),  9  Gush.  (Mass.)  255,  57 
Am.  Dec.  46;  Graf  ton  Bank  v. 


Moore  (1842),  13  N.  H.  99,  38  Am. 
Dec.  478;  Franklin  v.  Hoadley 
(1911),  145  N.  Y.  App.  Div.  228, 
130  N.  Y.  Supp.  47. 

30 Brown  v.  Crandall  (1835),  11 
Conn.  92;  Bowen  v.  Eutherford 
(1871),  60  111.  41,  14  Am.  Eep.  25; 
Cook  v.  Slate  Co.  (1880),  36  Ohio 
St.  135,  38  Am.  Eep.  568;  Potter 
v.  Greene  (1858),  9  Gray  (Mass.), 
309,  69  Am.  Dec.  290. 

31  See  Lieb  v.  Craddock  (1888), 
87  Ky.  525,  9  S.  W.  838;  Dunham 
v.  Loverock  (1893),  158  Pa.  197, 
27  Atl.  990,  38  Am.  St.  E.  838, 
Mechem's  Gas.  6;  In  re  Gibbs' 
Estate  (1893),  157  Pa.  59,  27  Atl. 
383,  22  L.  E.  A.  276,  Gilm.  Gas. 
91;  Smith  v.  Moynihan  (1872),  44 
Cal.  53. 

38  See  post,  §  393. 


60 


CHAPTER  V. 


WHAT  ACTS  AND  CONTEACTS  CREATE  A  PARTNERSHIP. 


67.  How  question  arises. 

68.  Partnerships  inter  sese  and  as 

to  third  persons. 

I.  OF  TRUE  PARTNERSHIPS. 

69.  True  partnerships,  how  clas- 

sified. 

70.  Of  partnerships  express- 
ly intended. 

71.  Of    agreements    held   to 

create     partnerships     inter 
sese  when  that  was  not  in- 
tended. 

72.  73.  Legal    intention   of   par- 

ties controls. 

74.  Tests  of  intention  to  form 
partnership. 

75-77.  Agreements  to  share 

both  profits  and  losses. 

78-80.  Agreements  to  share 

profits,  nothing  being  said 
about  losses. 

81.  Agreements  to  share 

profits  with  express  stipu- 
lation against  losses. 


82. 


83. 


84. 


—  Partnership 
only. 

—  Agreements 
gross  returns. 

—  Agreements 
losses  only. 


profits 


to      share 


to      share 


II.  OP    SO-CALLED    QUASI-PARTNER- 
SHIPS. 

§    85.  Of   partnerships   as   to   third 

persons. 

1.  Of  Sharing  Profits. 
86,  87.  Sharing  profits  was   for- 
merly a  ground  of  liability 
to  third  persons  as  a  part- 
ner. 

88-90.  Of    the    case    of    Cox    v. 
Hickman. 

91.  Effect  of  Cox  v.  Hickman  on 

English  law. 

92.  E,ffect  of  Cox  v.  Hickman  in 

the  United  States. 

93.  Beecher    v.    Bush. 

94.  95.  Harvey  v.  Childs. 

96-98.  Meehan  v.  Valentine. 

2.  Of  Holding  Out  as  a  Partner. 
99-101.  Person   may   become   lia- 
ble as  a  partner  by  hold- 
ing himself  out  as  one. 

102.  What  facts  must  exist? 

103,  104.  :Who    may    enforce 

liability? 

105.  Holding     out      to      the 

world. 

106.  Methods  of  holding  out. 

107.  Evidence  admissible. 

108-111. The  effect. 


§  67.  How  question  arises.— The  question  as  to  the  existence 
of  a  partnership  between  given  individuals  may  arise  in  two 
classes  of  cases: 

61 


§§  68,  69]  LAW  OP  PARTNERSHIP 

1.  Where  the  parties  themselves  allege  that  they  intended 
partnership. 

2.  Where  the  parties  or  some  of  them  allege  that  they  did 
not  intend  partnership,  and  third  persons,  usually  creditors,  are 
seeking  to  establish  it  against  them. 

The  latter  is,  by  far,  the  more  common  case. 

§68.  Partnerships  inter  sese  and  as  to  third  persons. — It 

is,  in  general,  true,  as  has  been  seen,1  that  as  between  the  parties 
to  the  alleged  relation  there  can  be  no  partnership  if  they  did 
not  intend  one,  and  that  as  to  third  persons  there  can  be  no 
partnership  if  there  was  none  as  between  the  alleged  partners 
themselves.  Notwithstanding  this  general  rule,  it  is  equally 
true,  as  will  be  hereafter  seen,  that  there  are  two  apparent  ex- 
ceptions to  it.: 

1.  Persons  may  be  held,  notwithstanding  a  contrary  inten- 
tion, to  haVe  made  a  contract  which  in  law  constitutes  them 
partners  as  between  themselves ;  and 

2.  A  person  who  is  not  actually  a  partner  may  be  held  liable 
to  third  persons  as  though  he  were  a  partner  where  he  has  so 
conducted  himself  as  to  reasonably  induce  such  third  persons  to 
rely  upon  the  assumption  that  he  was  a  partner. 

It  will  be  obvious  that  these  two  cases  are  very  different ;  in 
the  first  all  the  parties  are  held  to  be  partners  as  between  them- 
selves, while  in  the  second  a  person  may  be  held  liable  as  though 
he  were  a  partner  when  in  fact,  between  him  and  the  persons 
with  whom  he  is  thus  assumed  to  be  a  partner,  no  actual  part- 
nership existed.  The  first  form,  or  the  partnership  inter  sese, 
is  therefore  the  only  true  partnership.  This  has  sometimes  led 
to  a  classification  into,  1,  true  partnerships,  and  2,  quasi-part- 
nerships,  though  the  latter  are  not  partnerships  at  all.  The 
proper  classification  is  into,  1,  true  partnerships  with  their  re- 
sulting liabilities,  and,  2,  liability  as  a  partner  where  no  actual 
partnership  exists. 

I.  OF  TRUE  PARTNERSHIPS. 

§  69.  True  partnerships,  how  classified. — It  will  be  evident 
that  true  partnerships  also  may  be  divided  into  two  classes :  ]. 

1  See  ante,  §  59. 

62 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§  70 

Where  a  partnership  was  expressly  intended;  and  2.  Where 
the  parties  did  not  expressly  intend  to  become  partners,  but 
the  law  holds  that  the  contract  which  they  intentionally  made 
does  create  a  partnership  between  them,  and  their  relation  thus 
becomes,  indirectly,  in  law  an  intentional  partnership,  because 
it  is  said  that  the  law  always  presumes  that  parties  intended 
the  legal  result  of  their  intentional  acts.  These  two  classes  will 
be  separately  considered. 

§70.  I.  Of  partnerships  expressly  intended. — Cases  of  this 
nature  can  ordinarily  occasion  but  little  difficulty.  If  it  be 
admitted  that  the  parties  intended  to  be  partners,  their  inten- 
tion can  rarely  fail  of  effect.  Cases,  however,  are  occasionally 
found  in  which  the  parties,  intending  to  create  a  partnership 
and  expressly  naming  their  relation  such,  have  still  been  held 
not  to  have  created  one,  because  they  had  failed  to  attach  to 
their  relation  the  necessary  incidents  of  partnership;  as,  for 
example,  where  their  contract  leaves  them  without  any  com- 
munity of  interest  in  the  business  or  profits.2 

It  may  also  be  that  an  instrument  designed  to  constitute 
partnership  articles  is  so  defectively  drawn  as  to  create  some 
other  relation,  as  a  co-ownership  or  a  corporation;  but  unless 
some  other  distinct  relation  is  thus  expressly  created,  or  some 
indispensable  element  is  omitted,  persons  who  have  intended  to 
be  partners,  and  who  have  acted  as  such,  will  be  deemed  to  be 
partners  notwithstanding  defective  instruments. 

2  Thus,  in  Sailors  v.  Nixon-Jones  tract  as  to  leave  them  without  any 

Printing   Co.    (1886),   20   111.   App.  community  of  interest  in  the  busi- 

509,  Mechem's  Gas.  85,  it  is  said:  ness  or  profits,  fLoy  are  not  part- 

"The  fact  that  the  parties  to  such  ners  in  fact  or  in  law.    Parsons  on 

relation   themselves   call  it   a   part-  Partnership,     91.       A     partnership 

nership  will  not  make  it  so.    Where  inter   se  must   result   from   the   in- 

the    question    of    partnership    is   to  tention  of  the  parties  as  expressed 

be  determined  from  a  contract  be-  in    the    contract,    and    they    cannot 

tween  the  parties  to  it,  the  relation  be    made    to    assume    toward    each 

must  be  found  from  the  terms  and  other    a   relation    which    they   have 

provisions  of  the  contract,  and  even  expressly  contracted  not  to  assume, 

though    parties    intend    to    become  The  terms  of  the  agreement,  where 

partners,  yet,  if  they  so  frame  the  there   is   one,   fixes   the   real   status 

terms  and  provisions  of  their  con-  of  the  parties  toward  each  other." 

63 


§§  71,  72]  LAW   OF   PARTNERSHIP 

§  71.  II.  Of  agreements  held  to  create  partnership  inter  sese 
when  that  was  not  intended. — The  question  whether  a  partner- 
ship has  in  fact  been  created  between  two  or  more  persons,  part 
or  all  of  whom  deny  it,  may  arise  in  a  great  variety  of  cases. 
It  is  constantly  arising  as  between  the  alleged  partners  and  third 
persons  who  are  seeking  to  hold  them  liable  as  such,  and  this 
phase  of  the  question  presents  the  most  difficulty  and  gives  rise 
to  the  greatest  amount  of  litigation. 

The  question,  however,  may  and  often  does  arise  as  between 
the  alleged  partners  themselves.  As  between  these  parties,  the 
question  usually  arises  in  one  of  two  classes  of  cases :  1.  Where 
an  affair  in  which  they  have  been  in  some  way  concerned  has 
proven  to  be  profitable,  and  one  or  more,  alleging  partnership, 
seek  to  compel  an  accounting,  as  partners,  from  the  others,  who 
deny  it ;  and  2.  "Where  such  an  enterprise  has  proved  disastrous, 
and  one  or  more  alleging  partnership  seek  to  enforce  contribu- 
tion as  partners  from  the  others,  who  deny  that  any  such  re- 
lation existed.3  Other  cases  may,  of  course,  arise  where  one  or 
more  claim  other  rights  or  powers  as  partners  against  the  others, 
but  the  two  classes  of  cases  stated  are  the  most  common. 

§  72.  Legal  intention  of  parties  controls. — Partnership,  as 
has  been  seen,  is  the  result  of  the  express  or  implied  agreement 
of  the  parties,  and  there  can  be  no  partnership — either  as  be- 
tween the  parties  themselves  or  as  to  third  persons — where  the 
parties  have  not  by  their  acts  or  contracts  created  one.  "When, 
therefore,  the  parties  themselves,  or  some  of  them,  deny  that 
they  intended  to  form  a  partnership,  it  becomes  necessary  to 
determine  what  is  the  legal  effect  of  their  acts  and  contracts. 
In  dealing  with  this  question,  it  must  be  borne  in  mind  that  it 
is  the  legal  intention  of  the  parties  rather  than  their  expressed 
or  declared  intention  which  controls.  The  law,  it  is  said,  pre- 
sumes that  the  parties  intend  the  legal  consequences  of  their 
voluntary  acts  and  contracts.  If,  therefore,  they  intend  the 
acts  or  contracts,  they  intend  also,  in  contemplation  of  law,  the 
legal  effect  of  those  acts  and  contracts.4  Whether,  then,  the 

3  See  McDonald  v.  Fleming  4  Thus  in  Duryea  v.  Whitcomb 
(1913),  178  Mich.  206,  144  N.  W.  (1858),  31  Vt.  393,  Mechem's  Cas. 
519.  89,  Gilm.  Cas.  13,  the  court  says: 

64 


WHAT  ACTS   CREATE  A  PARTNERSHIP  [§  73 

question  arises  between  the  parties  themselves,  or  between  the 
parties  and  third  persons,  if  the  legal  effect  of  their  acts  and 
contracts  is  the  creation  of  a  partnership,  the  parties  will  be 
deemed  partners,  notwithstanding  their  denial  of  an  intention  to 
become  such.  The  law  gathers  their  intention  from  their  acts 
and  contracts  at  the  time,  rather  than  from  their  contempo- 
raneous or  subsequent  assertions.  Greater  effect  may,  however, 
be  given  to  the  expressed  intentions  of  the  parties  when  the 
question  arises  between  themselves  only,  than  where  third  per- 
sons are  concerned.5  The  latter  cannot  be  presumed  to  know 
of  the  declared  intention,  and  must  therefore  be  left  to  judge 
by  the  legal  intention  which  the  outward  acts  and  contracts 
of  the  parties  manifest.  In  doubtful  cases,  however,  of  either 
sort,  the  expressed  intention  may  be  of  consequence,  and  may 
even  turn  the  scale  in  accordance  with  it. 

§  73.  Same  subject. — Keeping  these  distinctions  in  view,  it 
is  then  true,  as  the  rule  is  frequently  declared,  that  whether 
a  partnership  has  been  created  depends  upon  the  real  intention 
of  the  parties.  If  their  agreement  is  in  writing,  its  true  con- 
struction must  be  ascertained.  If  it  is  not  in  writing,  then  the 

"If  their  contract  was  for  a  part-  other    circumstances    to    show    the 

nership  by  necessary  legal  construe-  contrary,  that  they  intended  to  cre- 

tion    (which    we    have    found    that  ate  the  relation  which  the  contract 

it  was),  and  they  intended  to  make  expresses."     See,  also,  Chapman  v. 

the  contract  (and  this  appears  from  Hughes    (1894),    104    Gal.    302,    37 

the  report),  the  .legal  effect  of  their  Pac.  1048;    Spaulding  v.  Stubbings 

contract    could    not    be    varied    by  (1893),  86  Wis.  255,  56  N.  W.  469, 

their  not  supposing  it  to  be  what  39  Am.  St.  E.  888,  Mechem's  Gas. 

it   was.     The  further  statement   in  149;  Magovern  v.  Eobertson  (1889), 

the  report  that  they  did  not  intend  116  N.  Y.  61,  22  N.  E.  398,  5  L. 

to  form  a  partnership  seems  incon-  E.    A.    589,    Mechem's    Gas.    154; 

sistent  with  the  other  facts.    *    *    *  Bradley  v.  Ely  (1900),  24  Ind.  App. 

Probably    the    fair    construction    of  2,  56  N.  E.  44,  79  Am.  St.  E.  251, 

the  report  is  that  the  parties  were  Gilm.  Gas.   10;    Wade  v.  Hornaday 

not  aware  of  the  legal  extent  and  (1914),  92  Kan.  293,  140  Pae.  870; 

obligation     of     the     contract     into  Illinois  Malleable  Iron  Co.  v.  Eeed 

which    they    entered.      As    the    con-  (1897),    102   Iowa   538,   71   N.   W. 

tract    imports     a    partnership,    we  423. 

must   hold,   in   the   absence   of   any  5  See   McDonald   v.   Fleming,   sit- 
express     stipulation     and     of     any  pro;      Fechteler     v.      Palm      Bros. 
Mech.  Part. — 5  65 


74] 


intention  of  the  parties  must  be  gathered  from  their  words  and 
conduct.  What  the  parties  have  called  themselves  is  not  con- 
clusive, for  if  they  have  stipulated  for  what  is  a  partnership  in 
fact,  then  even  their  express  agreement  that  they  should  not 
be  partners  would  not  prevent  the  legal  operation  of  their  stipu- 
lations.6 If,  on  the  other  hand,  their  acts  and  contracts  do  not 
in  law  create  a  partnership,  the  fact  that  they  have  expressly 
called  it  such  will  not  make  it  one.7 

§  74.  Tests  of  intention  to  form  partnership. — While  the  in- 
tention of  the  parties  is  thus,  in  general,  the  controlling  inquiry, 
there  are  a  number  of  methods  by  which  the  courts  have  en- 
deavored to  ascertain  what  that  intention  was.  Keeping  in 
mind  the  definition  that  the  partnership  relation  is  based  upon 
the  agreement  of  the  parties  to  unite  their  property,  labor,  capital 
or  skill  in  carrying  on  business  as  co-owners  or  principals  for 
their  joint  profit,  each  being  at  the  same  time  both  principal 
of  and  agent  for  the  other,8  several  of  the  tests  which  are  com- 


(1904),  66  C.  C.  A.  336,  133  Fed. 
462;  HitcMngs  v.  Ellis  (1859),  12 
Gray  (78  Mass.)  449. 

6  Thus  in  Beecher  v.  Bush  (1881), 
45  Mich.  188,  7  N.  W.  785,  40  Am. 
Eep.  465,  Mechem's  Gas.  118,  Gilm. 
Gas.  49,  after  calling  attention  to 
the  fact  that  in  that  case  the  par- 
ties manifestly  had  no  purpose  to 
become  partners,  it  is  said  by 
Cooley,  J.:  "In  general  this  should 
be  conclusive.  If  parties  intend  no 
partnership  the  courts  should  give 
effect  to  their  intent,  unless  some- 
body has  been  deceived  by  their 
acting  or  assuming  to  act  as  part- 
ners; and  any  such  case  must  stand 
upon  its  peculiar  facts  and  upon 
special  equities.  It  is,  nevertheless, 
possible  for  parties  to  intend  no 
partnership  and  yet  to  form  one. 
If  they  agree  upon  an  arrangement 
which  is  a  partnership  in  fact,  it  is 
>f  no  importance  that  they  call  it 


something  else,  or  that  they  even 
expressly  declare  that  they  are  not 
to  be  partners.  The  law  must  de- 
clare what  is  the  legal  import  of 
their  agreements,  and  names  go  for 
nothing  when  the  substance  of  the 
arrangement  shows  them  to  be  inap- 
plicable. But  every  doubtful  case 
must  be  solved  in  favor  of  their 
intent,  otherwise  we  should  carry 
the  doctrine  of  constructive  part- 
nership so  far  as  to  render  it  a  trap 
to  the  unwary.  Kent,  C.  J.,  in  Post 
v.  Kimberly,  9  Johns.  (N.  Y.)  470, 
504." 

7  Sailors  v.  Nixon- Jones  Co. 
(1886),  20  111.  App.  509,  Mechem's 
Gas.  85;  Oliver  v.  Gray  (1842),  4 
Ark.  425,  Burd.  Gas.  16. 

8 ' '  As  said  in  McDonald  v.  Camp- 
bell (1905),  96  Minn.  87,  104  N.  W. 
760,  there  is  no  arbitrary  test  by 
which  to  determine  when  a  partner- 
ship exists.  It  depends  upon  the  in- 


66 


WHAT  ACTS   CREATE  A  PARTNERSHIP  [§§75,  76 

monly  applied  to  aid  in  determining  when  such  an  agreement 
exists  may  be  noticed.    Among  these  are — 

§75.  I.  Agreements  to  share  both  profits  and  losses. — An 
agreement  between  two  or  more  persons  to  unite  their  property, 
labor,  skill,  or  capital  to  establish  and  carry  on  a  business,  in 
which  business  they  are  to  have  a  community  of  interest — which 
they  are  to  own  in  common,  in  which  each  is  to  be  a  principal 
owner  or  proprietor  as  distinguished  from  a  mere  agent,  clerk  or 
creditor — and  the  profits  and  losses  of  which  they  are  to  share 
because  they  are  such  owners,  principals  or  proprietors,  is  the 
typical  form  of  partnership.  Such  an  agreement  creates  a  part- 
nership between  the  parties  as  a  matter  of  law. 

§76.  Same  subject. — Agreements,  however,  which  present 
all  of  these  characteristics  occasion  no  difficulty,  and  the  ques- 
tion of  partnership  is  easily  and  certainly  solved.  The  difficulty 
arises  in  those  cases — which  unfortunately  but  naturally  con- 
stitute the  great  majority  of  those  submitted  to  lawyers  or  courts 
for  determination — in  which  some  of  these  elements  only  are 
discernible,  while  others  are  not  apparent  at  all  or  are  to  be 
extracted  from  a  mass  of  more  or  less  conflicting  facts  and  cir- 
cumstances. In  such  cases,  the  elements  which  do  appear  are 
not  necessarily  conclusive,  and  it  is  both  unwise  and  dangerous 
to  seize  upon  them  as  sufficient;  they  are  evidence  merely,  and, 
as  such,  are  more  or  less  convincing  according  as  they  fit  in 
with  the  remaining  elements  discovered. 

Of  this  nature  is  the  mere  element  of  sharing  profits  and 

tention  of  the  parties,  and  this  in-  business  as  principals  and  agents? 

tention    must    be    ascertained    from  If  there  is  a  joint  business,  it  natur- 

the    evidence    and    all    the    eircum-  ally  follows  that  the  parties  were  to 

stances  of  the  case.    If  the  evidence  share  the  profits  in  some  proportion, 

shows  that  the  parties  intended  to  and   hence    an   agreement   to    share 

combine   their   property,    labor   and  profit    is    strong    evidence   that   the 

skill  as  principals   for  the  purpose  enterprise  was  to  be  conducted  as  a 

of  enjoying  the  profits,  it  establishes  joint    undertaking."      McAlpine    v. 

a  partnership.     The  question  always  Millen    (1908),   104  Minn.  289,  116 

is,   was    there   a   joint    business,    or  N.  W.  583. 
were    the    parties    carrying    on    the 

67 


§  77]  LAW  OP  PARTNERSHIP 

losses.  It  certainly  furnishes  strong  evidence  that  the  parties 
have  united  as  principals  for  their  joint  profit,  if  any,  and  in 
the  absence  of  anything  to  show  that  the  profits  and  losses  were 
to  be  shared  on  some  other  basis  than  that  of  principals  in  the 
business,  it  would  usually  be  deemed  conclusive.9  But  it  may 
still  be  shown  that  they  were  to  share  the  profits  and  losses  in 
some  other  capacity,  and  the  evidence  of  partnership  is  thereby 
weakened  if  not  dispelled.  Where  both  parties  contribute  goods, 
or  money  to  buy  goods,  for  a  common  stock,  in  which  they  thus 
acquire  a  joint  interest,  then  an  agreement  for  a  division  of  the 
profit  and  loss  furnishes  the  strongest  evidence  of  a  partnership  ; 
and  the  same  is  true  where  each  is  to  contribute  services. 

§77.  Same  subject. — The  evidence  is  also  strong  where  one 
furnishes  money  or  property  and  the  other  furnishes  services, 
though  it  is  less  strong  in  this  case  than  in  the  others,  because 
the  parties  have  not  necessarily  a  joint  interest  in  the  property, 
and  the  sharing  in  profits  and  loss  may  be  but  one  means  of 
compensating  the  second  party  for  his  services.  Still  less  strong 
is  the  evidence  where,  though  the  parties  are  to  share  profits 
and  losses  in  the  sale  of  goods,  each  one  retains  the  individual 
title  or  control  of  his  contribution. 

To  constitute  a  partnership,  therefore,  there  must  be  added 
to  the  evidence  of  this  one  element  of  sharing  profits  and  losses, 
the  further  evidence  that  the  parties  who  so  shared  in  such  profits 
and  losses  were  also  principal  proprietors  in  the  business  from 
which  such  profits  or  losses  ensued,  and  that  such  sharing  was 
because  they  stood  in  the  relation  of  such  principal  proprietors 
and  not  in  some  other  relation.10 

9  Such  an  arrangement,  it  is  fre-  Palm  (1904),  66  C.  C.  A.  336,  133 
quently  said,  raises  a  prima  facie  Fed.  462,  Gilm.  Gas.  76;  Spaulding 
case  of  partnership.  See,  e.  g.,  Tor-  v.  Stubbings  (1893),  86  Wis.  255, 
bert  v.  Jeffrey  (1901),  161  Mo.  645,  56  N.  W.  469,  39  Am.  St.  E.  888, 
61  S.  W.  823;  Illinois  Malleable  Mechem's  Gas.  149;  Culley  v.  Ed- 
Iron  Co.  v.  Eeed  (1897),  102  Iowa  wards  (1884),  44  Ark.  423,  51  Am. 
538,  71  N.  W.  423.  Rep.  614;  Boston  Smelting  Co.  v. 

10 See  Canton  Bridge  Co.  v.  City  Smith  (1880),  13  E.  I.  27,  43  Am. 

of  Eaton  Eapids  (1895),  107  Mich.  Eep.  3;  Clifton  v.  Howard  (1886), 

613,  65  N.  W.  761,  Mechem  »g  Gas.  89  Mo.  192,  1  S.  W.  26,  58  Am.  Eep. 

758,  Burd.  Gas.  90;  Fechteler  v.  97,  Burd.  Gas.  88;  Torbert  v.  Jeffrey 

68 


WHAT  ACTS   CREATE  A  PARTNERSHIP  [§§78,  79 


§78.  II.  Agreements  to  share  profits,  nothing  being  said 
about  losses. — It  not  infrequently  happens  that,  while  the 
element  of  profit  sharing  is  clearly  evident,  the  question  of  shar- 
ing losses  appears  to  have  been  ignored.  The  failure  or  omission 
to  provide  for  the  losses  may  have  been  accidental  or  intentional. 
If  it  was  accidental  merely,  it  is  ordinarily  of  little  consequence, 
because  the  law  will  supply  the  omission  if  the  other  elements 
are  present,  by  assuming  that  the  losses,  like  the  profits,  were 
to  be  shared  equally.11  But  if  the  omission  was  intentional,  it 
challenges  inquiry,  though  it  may  not  be  conclusive.  Ordinarily 
one  who  shares  the  profits  of  the  business  because  he  is  a  prin- 
cipal therein,  must,  for  the  same  reason,  share  the  losses  also 
if  loss  results.  But  it  is  possible  that  one  may  share  the  profits 
of  a  business  without  being  a  proprietor  therein.  The  facts 
must  therefore  be  investigated  further,  and  it  must  be  ascer- 
tained why  and  in  what  relation  the  profits  are  to  be  received. 

§79.  Same  subject. — Pursuing  the  investigation,  if  it  be 
found  that  the  parties  have  contributed  to  form  a  joint  stock 


(1901),  161  Mo.  645,  61  S.  W.  823; 
Hughes  v.  Ewing  (1901),  162  Mo. 
261,  62  S.  W.  465;  Howze  v.  Patter 
son.  (1875),  53  Ala.  205,  25  Am. 
Eep.  607;  Gulf  City  Co.  v.  Boyles 
(1900),  129  Ala.  192,  29  So.  800; 
Thillman  v.  Benton  (1895),  82  Md. 
64,  33  Atl.  485.  In  a  leading  case 
in  Oregon  (Flower  v.  Barnekoff 
(1890),  20  Ore.  137,  25  Pac.  370,  11 
L.  B.  A.  149) ,  it  is  said :  ' '  Partner- 
ship and  community  of  interest  inde- 
pendently considered  are  not  always 
the  same  thing,  nor  is  a  mere  com- 
munity of  interest  sufficient;  but 
there  must  be  an  agreement  to  share 
the  profits  and  loss,  and  such  profits 
must  be  shared  as  the  result  of  the 
adventure  or  enterprise,  in  which 
both  are  interested,  and  not  simply 
as  a  measure  of  compensation  (Cogs- 
well v.  Wilson,  11  Ore.  372,  21  Pac. 
388) ;  "  and  "where  it  appears  that 


there  is  community  of  interest  in  the 
capital  stock,  and  also  a  community 
of  interest  in  the  profits  and  loss, 
there  it  is  clear  an  actual  partner- 
ship exists  between  the  parties.  Ber- 
thold  v.  Goldsmith,  24  How.  (IT.  S.) 
541." 

One  who  loans  money  to  a  part- 
ner to  put  into  the  business,  and 
takes  security  upon  -his  interest  in 
the  business,  has  not  thereby  such  a 
community  of  interest  in  the  busi- 
ness as  makes  him  a  partner  with 
the  others.  Fish  v.  Thompson 
(1895),  68  Vt.  273,  35  Atl.  174, 
Burd.  Cas.  3. 

11  See  Sawyer  v.  Worthington 
(1856),  28  Vt.  733;  Quinn  v.  Quinn 
(1889),  81  Cal.  14,  22  Pac.  264; 
Wipperman  v.  Stacy  (1891),  80  Wis. 
345,  50  N.  W.  336,  Mechem's  Cas. 
376;  McAlpine  v.  Millen  (1908), 
104  Minn.  289,  116  N.  W.  583. 


69 


79J 


LAW  OF  PAETNERSIIIP 


or  capital  of  property  or  skill  or  labor,  and  have  in  the  busi- 
ness a  community  of  interest,  then  an  agreement  to  share  profits 
furnishes  very  strong  evidence  of  partnership.  But  if  one  party 
only  is  to  supply  the  stock  or  capital,  the  case  is  not  so  clear, 
though  it  is  not  conclusive.  If,  notwithstanding  the  fact  that 
one  is  to  furnish  all  the  capital  in  the  first  instance,  it  still  ap- 
pears that  the  parties  are  to  own  the  business  in  common,  or 
are  to  have  a  common  interest  in  or  power  of  control  over  it, 
there  is  then  the  community  of  interest  which  ordinarily  con- 
stitutes partnership ; 12  but  if  there  is  to  be  no  co-ownership  of 


12  This  distinction  is  illustrated 
in  such  cases  as  Magovern  v.  Bobert- 
son  (1889),  116  N.  Y.  61,  22  N.  E. 
398,  5  L.  E.  A.  589,  Mechem's  Gas. 
154,  where  the  parties  held  liable  as 
partners  had  not  only  a  right  to 
share  in  the  profits  but  had  also,  by 
the  express  terms  of  the  contract,  an 
interest  in  the  stock  and  business  to 
the  extent  of  their  loans  and  in- 
dorsements. "Persons,"  said  the 
court,  "having  a  proprietary  inter- 
est in  a  business  and  in  its  profits 
are  liable  as  partners  to  creditors-" 
To  like  effect,  because  the  alleged 
clerk  was  not  only  to  have  a  share 
of  the  profits  as  compensation,  but 
was  also  to  have  an  interest  in  the 
stock  and  business  itself:  Sawyer 
v.  First  National  Bank  (1894),  114 
N.  C.  13,  18  S.  E.  949;  Hackett  v. 
Stanley  (1889),  115  N.  Y.  625,  22 
N.  E.  745,  Burd.  Gas.  57,  Gilm.  Gas. 
27;  and  because  the  alleged  leaner 
of  money  was  also  to  have  an  in- 
terest in  and  control  over  the  busi- 
ness: Spaulding  v.  Stubbings 
(1893),  86  Wis.  255,  56  N.  W.  469, 
39  Am.  St.  E.  888,  Mechem's  Gas. 
149. 

Care  must  therefore  be  taken  to 
discriminate  between  the  cases  of 
alleged  loans  with  a  share  of  the 


profits  by  way  of  interest,  and  a  real 
partnership  disguised  as  a  loan;  for 
if  it  appears  that  the  transaction  is 
a  mere  device  to  obtain  the  advan- 
tages of  a  partnership  without  the 
responsibilities,  it  will  be  held  to 
be  a  partnership  whatever  the  par- 
ties may  have  called  it.  The  test 
is  usually  to  be  found,  according  to 
the  later  cases,  in  the  powers  of  con- 
trol of  the  alleged  lender.  Has  he 
any  voice  or  part  in  controlling  the 
management  of  the  business  as  a 
nrineical  therein?  Has  he,  by  vir- 
tue of  the  arrangement,  such  an  in- 
terest in  the  business  that  he  can 
be  regarded  both  as  principal  and 
agent  for  the  others?  See  Bosen- 
field  v.  Haight  (1881),  53  Wis.  260, 
10  N.  W.  378,  40  Am.  Eep.  770;; 
Eichardson  v.  Hughitt  (1879),  76 
N.  Y.  55,  32  Am.  Eep.  267;  Leggett 
v.  Hyde  (1874),  58  N.  Y.  272,  17 
Am.  Eep.  244,  Burd.  Gas.  50,  Gilm. 
Gas.  22;  Hackett  v.  Stanley,  supra; 
and  especially,  Waverly  Nat.  Bank 
v.  Hall  (1892),  150  Pa.  St.  466,  24 
Atl.  665,  30  Am.  St.  Eep.  823,  Me- 
chem's Gas.  145,  and  Magovern  v. 
Eobertson,  supra.  In  Ex  parte 
Briggs  (1833),  3  Deac.  &  Ch.  367, 
Burd.  Gas.  3,  Gilm.  Gas.  4,  a  dis- 
tinction was  made  between  the  case 


70 


[§79 


the  business  and  one  is  to  receive  his  share  of  the  profits  in  some 
other  capacity  than  as  a  principal  proprietor,  as,  for  example, 
if  he  is  to  receive  it  as  compensation  for  his  services,  there  is 
no  partnership.  Plainly,  also,  one  who  has  a  share  of  the  profits 
in  another's  business  by  way  of  commission  merely,  or  in  lieu 
of  salary,  or  as  rent,  or  as  interest  on  loans,  and  the  like,  is  not 
a  partner  with  the  owner  of  that  business.13  To  make  the  parties 


in  which  the  stipulation  for  a  share 
in  the  profits  was  made  at  the  time 
of  the  loan,  and  the  case  where  it 
was  made  afterwards.  It  is  less 
likely  to  be  a  partnership  in  the 
latter  case.  So  care  must  be  taken 
to  discriminate  between  a  real  lease 
of  premises  and  a  partnership  dis- 
guised under  the  form  of  a  lease; 
for  if  the  characteristics  of  a  part- 
nership are  present,  it  will  be  held 
to  be  such  regardless  of  what  the 
parties  may  have  called  it.  Webster 
v.  Clark  (1894),  34  Fla.  637,  16  So. 
601,  43  Am.  St.  E.  217,  27  L.  E.  A. 
126  Merrall  v.  Dobbins  (1895),  169 
Pa.  480,  32  Atl.  578,  Burd.  Gas.  86; 
Leavitt  v.  Windsor  Land  Co.  (1882), 
4  C.  C.  A.  425,  54  Fed.  439. 

13  See  Shepard  v.  Pratt  (1876), 
16  Kan.  209;  Sodiker  v.  Applegate 
(1884),  24  W.  Va.  411,  49  Am.  Eep. 
252,  Gilm.  Cas.  5;  Beecher  v.  Bush 
(1881),  45  Mich.  188,  7  N.  W.  785, 
40  Am.  Eep.  465,  Mechem's  Cas. 
118,  Gilm.  Cas.  49 ;  Drilling  v.  Arm- 
strong (1910),  94  Ark.  505,  127  S. 
W.  725;  McDonnell  v.  Battle  House 
Co.  (1880),  67  Ala.  90,  42  Am.  Eep. 
99;  Harvey  v.  Childs  (1876),  28 
Ohio  St.  319,  22  Am.  Eep.  387,  Me- 
chem's Cas.  129;  Thayer  v.  Augus- 
tine (1884),  55  Mich.  187,  20  N.  W. 
898,  54  Am.  Eep.  361;  Morgan  v. 
Farrel  (1890),  58  Conn.  414,  20  Atl. 
614,  18  Am.  St.  E.  282,  Mechem's 
Cas.  171;  Waverly  Nat.  Bank  v. 


Hall  (1892),  150  Pa.  St.  466,  24  Atl. 
665,  30  Am.  St.  E.  823,  Mechem's 
Cas.  145;  Boston  Smelting  Co.  v. 
Smith  (1880),  13  E.  I.  27,  43  Am. 
Eep.  3;  Estabrook  v.  Woods  (1906), 
192  Mass.  499,  78  N.  E.  538;  Par- 
chen  v.  Anderson  (1885),  5  Mont. 
438,  5  Pac.  588,  51  Am.  Eep.  65; 
Culley  v.  Edwards  (1884),  44  Ark. 
423,  51  Am.  Eep.  614;  Waggoner  v. 
First  Nat.  Bank  (1894),  43  Neb. 
84,  61  N.  W.  112;  Jeter  v.  Burgwyn 
(1893),  113  N.  Car.  157,  18  S.  E. 
113.  One  who  loans  money  to  a  man 
engaged  in  manufacturing  and  sell- 
ing a  patent  medicine,  with  the 
understanding  that  the  sum  loaned 
should  be  used  to  buy  ingredients 
which  should  be  made  up  into  the 
medicine,  and  the  latter  sold  by  the 
proprietor  in  the  usual  way;  and 
that  the  lender  should  have  one- 
fourth  of  the  profits,  is  not  thereby 
made  a  partner  with  the  proprietor: 
Salter  v.  Ham  (1865),  31  N.  Y.  321. 
In  respect  of  sharing  profits  by. 
way  of  compensation  for  services,  it 
was  said  in  Sodiker  v.  Applegate, 
supra:  "In  all  cases  there  must  be 
a  participation  as  principals.  If  the 
persons  merely  occupy  the  relation 
of  principal  and  agent,  employer 
and  employee  or  factor,  no  partner- 
ship can  be  predicated  upon  the  fact 
that  such  agent,  employee  or  factor 
receives  a  part  or  share  of  the  profits 
for  his  service  or  other  benefits 


71 


§80] 

partners,  there  must  be  here,  as  in  the  former  case,  a  community 
of  interest  in  the  business  itself  as  principals — or  co-owners — 
each  one  being  at  once  principal  of  and  agent  for  the  others. 

A  mere  economic  interest  in  the  business  is  not  enough: — a 
lender  or  landlord  or  employee  who  realizes  that  he  is  not  likely 
to  get  his  money  unless  the  business  succeeds,  may  have  that, — 
there  must  be  a  proprietary  interest. 

§  80.  Same  subject. — The  Uniform  Partnership  Act  declares 
the  same  rule.14  "The  receipt  by  a  person  of  a  share  of  the 
profits  of  a  business  is  prima  facie  evidence  that  he  is  a  partner 
in  the  business,  but  no  such  inference  shall  be  drawn  if  such 
profits  were  received  in  payment: — 

(a)  As  a  debt  by  installments  or  otherwise, 

(Z>)  As  wages  of  an  employee  or  rent  to  a  landlord, 

(c)  As  an  annuity  to  a  widow  or  representative  of  a  deceased 
partner, 

(d)  As  interest  on  a  loan,  though  the  amount  of  payment  vary 
with  the  profits  of  the  business, 

(e)  As  the  consideration  for  the  sale  of  the  good-will  of  a 
business  or  other  property  by  installments  or  otherwise. ' ' 

conferred.    This  proposition  is  illus-  (1906),  147  Ala.  512,  40  So.  319, 

trated    by    numerous    cases,    among  Gilm.   Gas.   7;    Buzard  v.    Bank   of 

which  are  the  following:     Berthold  Greenville   (1886),  67  Tex.  83,  2  S. 

v.  Goldsmith,  24  How.  (U.  S.)  542;  W.  54,  60  Am.  Eep.  7;  Eoss  v.  Bur- 

Burckle    v.    Eckhart,    1    Denio    (N.  rage    (1919),  —  Mass.  — ,   124  N. 

Y.)    341;    Bowyer    v.    Anderson,    2  E.  267,  reaffirming  Denny  v.  Cabot 

Leigh   (Va.)    550;   Chapline  v.  Con-  (1843),    6    Mete.    (47    Mass.)     82; 

ant,  3  W.  Va.   507,  100  Am.  Dec.  Price  v.  Alexander  (1850),  2  Greene 

766;  Dils  v.  Bridge,  23  W.  Va.  20-;  (Iowa)  427,  52  Am.  Dec.  526.    Even 

Hanna  v.   Flint,  14   Cal.   73;    Mor-  if  a  person  could  be  held  to  be  a 

gan  v.  Stearns,  41  Vt.  397."     One  partner  as  to  a  particular  transae- 

who  manages  a  business  for  another  tion  by  reason  of  having  furnished 

on  the  understanding  that  he  is  "to  money  for  it  in  consideration  of  a 

have  a  living  out  of  the  business,"  share  of  its  profits,  this  would  not 

and,  if  it  proves  profitable,  a  half  of  make    him    a   partner    as    to    other 

the  profits,  is  not  thereby  made  a  transactions.       Jeter     v.     Burgwyn, 

partner.     Whitney  v.  Bank   (1897),  supra. 

50  Neb.  438,  69  N.  W.  933,  Burd.  14  Sec.  7,  subd.  4. 
Cas.  7.     See,  also,  Zuber  v.  Eoberts 

72 


WHAT  ACTS   CREATE  A  PARTNERSHIP  [§§  81,82 

§81.  III.  Agreements  to  share  profits  with  express  stipula- 
tion against  losses. — Agreements  are  sometimes  made  by  which, 
though  all  are  to  share  in  the  profits,  some  of  the  parties  are 
expressly  to  be  protected  against  loss.  Such  an  agreement  may 
constitute  a  partnership  if  the  other  elements  are  present.  It  is 
lawful  for  the  partners,  as  between  themselves,  to  stipulate  that 
one  or  more  of  them  shall  be  indemnified  against  loss,  though 
such  a  stipulation  cannot  affect  the  liability  of  the  partners  so 
indemnified  to  third  persons.16 

It  is  true  that  cases  are  sometimes  found  which  declare  that 
liability  for  losses,  as  well  as  participation  in  the  profits,  is  in- 
dispensable to  partnership ; 16  but  the  proposition  that  the  part- 
ners may,  so  far  as  they  themselves  are  concerned,  agree  that 
the  partnership  liability  of  one  shall  be  borne  by  the  other,  is 
sustained  by  the  weight  of  authority. 

§  82.  IV.  Partnership  in  profits  only. — It  is  not  indispensable 
that  there  shall  be  a  common  stock  or  fund  of  goods,  land  or 
other  tangible  property.  The  contributions  of  one  or  both  of 
the  partners  may  be  simply  skill  or  experience  or  capacity  to 
labor.  Even  if  tangible  property  is  necessary  to  the  transac- 
tion of  the  business,  it  is  not  essential  that  it  shall  be  owned 
by  all  or  any  of  the  partners.  It  may  be  hired  from  a  stranger, 
or  one  partner  may  supply  its  use  to  the  firm,  retaining  the 
title  in  himself.  It  may  be  also  that  the  contract  contemplates 
a  division  only  in  case  there  are  profits  made,  and  that,  if  there 

15  See  Brown  v.  Tapscott  (1840),  solidated  Bank  v.  State,  supra,  de- 

6  Mees.  &  Welsby,  119,  Ames'  Gas.  clared  that  this  would  not  be  true 

468;    Clift  v.   Barrow    (1888),   108  where     the    agreement    was    based 

N.  Y.  187,  15  N.  E.  327,  Burd.  Gas.  upon    a    good    consideration.      Com- 

93;    Pollard    v.    Stanton    (1845),   7  pare,  however,  In  re  Mitchell-Borne 

Ala.     761;     Consolidated    Bank    v.  Const.  Co.  (1919),  145  La. —,  82  So. 

State  (1850),  5  La.  Ann.  44;  Baxter  377. 

v.   Hart    (1894),   104   Cal.   344;    37  16  See  Winter  v.   Pipher    (1895), 

Pac.      941;      Eobbins     v.     Laswell  96  Iowa  17,  64  N.  W.  663;   John- 

(1862),  27  111.  365.  son  v.  Carter  (1903),  120  Iowa  355, 

Art.  2814  of  Louisiana  Civil  Code  94  N.  W.  850,  Gilm.  Gas.  54;   Me- 

(see    Appendix),    declares    such    a  Carney     v.     Lightner     (1920),     — 

stipulation  void  even  as  between  the  Iowa  — ,  175  N.  W.  751. 
partners  only;  but  the  court  in  Con- 

73 


§  83]  LAW  OF  PARTNERSHIP 

are  no  profits,  the  expenses  or  losses  are  to  be  borne  by  one 
only  or  by  both  in  their  individual  capacity.  Each  of  these 
cases,  and  others  of  like  kind  which  are  legally  possible,  con- 
template co-ownership  only  in  the  results  of  the  enterprise 
rather  than  in  the  enterprise  itself  or  the  means  of  conducting 
it,  and  they  are  frequently,  though  perhaps  not  very  appro- 
priately, spoken  of  as  partnerships  in  the  profits  only. 

Such  a  partnership  differs  from  others  in  degree  only  and 
not  in  kind.  To  the  extent  of  the  community  of  interest — 
whether  it  be  in  profits  only  or  more — there  is  a  partnership 
with  its  incident  rights  and  liabilities.17 

§83.  V.  Agreements  to  share  gross  returns. — Persons  who 
contribute  property  or  funds  for  a  common  enterprise  and  agree 
to  share  the  gross  returns  of  that  enterprise  in  proportion  to 
their  contributions,  but  who  severally  retain  the  title  to  their 
respective  contributions,  are  not  thereby  rendered  partners. 
They  have  no  common  stock  or  capital,  and  no  community  of 
interest  as  principal  proprietors  in  the  business  itself  from  which 
the  proceeds  are  derived. 

Thus,  co-owners  who  divide  the  earnings  of  a  chattel  are  not 
thereby  necessarily  made  partners;  nor  are  sailors  who  divide 
the  products  of  a  voyage;  or  persons  farming  land  on  shares; 
or  two  or  more  owners  of  connecting  coach-lines,  who  establish 
a  through  traffic  over  their  respective  lines,  and  pay  their  own 
expenses,  but  divide  the  gross  receipts  of  the  through  business 
in  some  agreed  proportion;  or  two  or  more  railroad  companies 
who  unite  to  form  a  continuous  line  of  carriage,  each  paying 
its  own  expenses  but  dividing  the  receipts  in  proportion  to  the 
length  of  their  respective  lines;  or  the  lessee  and  the  manager 
of  a  theater  who  share  the  gross  receipts ;  or  workmen  who  build 
a  chattel  together  for  sale  and  divide  the  proceeds;  or  persons 
one  of  whom  furnishes  a  farm  or  a  mill  or  a  brick-yard  and  the 
other  supplies  the  labor  and  materials  to  operate  it  and  who 
divide  the  product;  or  persons  who  casually  and  not  as  a  busi- 
ness unite  to  buy  land  or  chattels  to  be  sold  when  the  price  ad- 

17  See  Robbins  v.  Laswell  (1862),  (1860),  24  111.  483;  Voorhees  v. 
27  111.  365;  Stevens  v.  Faucet  Jones  (1861),  29  N.  J.  L.  270. 

74 


WHAT  ACTS  CREATE  A  PARTNERSHIP 


[§83 


vances  and  agree  to  divide  the  proceeds ;  or  persons  one  of  whom 
furnishes  a  plant  or  outfit  while  the  other  runs  it,  the  proceeds 
being  divided.  Neither  is  a  person  a  partner  who  leases  prop- 
erty for  a  share  in  the  gross  receipts,  as  where  one  lets  a  hotel 
or  a  vessel  or  machinery,  receiving  a  share  of  the  returns  as 
rent.18 


18  See  French  v.  Styring  (1857), 
2  Com.  B.  (N.  S.)  357,  Mechem's 
Cases  on  Partn.  1069,  Ames  Gas. 
41,  Burd.  Cas.  22;  (dividing  the 
earnings  of  a  race-horse) ;  Mair  v. 
Glennie  (1815),  4  Maule  &  Sel.  240 
(sailors) ;  Champion  v.  Bostwick 
(1837),  18  Wend.  (N.  Y.)  175,  31 
Am.  Dec.  376,  Ames  Cas.  110;  East- 
man v.  Clark  (1873),  53  N.  H.  276, 
16  Am.  Eep.  192;  Pattison  v. 
Blanchard  (1851),  5  N.  Y.  187 
(coach-owners) ;  Irvin  v.  Railroad 
Co.  (1879),  92  III.  103,  34  Am. 
Rep.  116  (railroad  companies) ; 
Lyon  v.  Knowles  (1863),  3  Best 
&  Sm.  556  (theater) ;  Hawkins  v. 
Mclntyre  (1873),  45  Vt.  496  (work- 
men);  Nelms  v.  McGraw  (1890),  93 
Ala.  245,  9  So.  719;  Robinson  v. 
Bullock  (1877),  58  Ala.  618  (mill); 
Lament  v.  Fullam  (1882),  133  Mass. 
583  (brick -yard) ;  Bruce  v.  Hast- 
ings (1868),  41  Vt.  380;  Munson  v. 
Sears  (1861),  12  Iowa  172  (land 
cases)  :  [But  there  may  be  a  part- 
nership in  buying  land  to  sell  again. 
See  Flower  v.  Barnekoff  (1890),  20 
Ore.  132,  25  Pac.  370,  11  L.  R.  A. 
149;  Bates  v.  Babcock  (1892),  95 
Cal.  479,  30  Pac.  605,  16  L.  R.  A. 
745,  29  Am.  St.  R.  133.]  Goell  v. 
Morse  (1879),  126  Mass.  480,  Me- 
chem's Cas.  767,  Burd.  Cas.  23 
(chattel  to  be  resold) ;  Quacken- 
bush  v.  Sawyer  (1880),  54  Cal.  439, 
Mechem's  Cas.  768,  Burd.  Cas.  25 
(circus  run  by  one  and  income  di- 


vided); Beeeher  v.  Bush  (1881),  45 
Mich.  188,  7  N.  W.  785,  40  Am. 
Rep.  465,  Mechem's  Cas.  118,  Gilm. 
Cas.  49;  O'Donnell  v.  Battle  House 
Co.  (1880),  67  Ala.  90,  42  Am. 
Rep.  99;  Miles  Co.  v.  Gordon 
(1894),  8  Wash.  442,  36  Pac.  265 
(hotel  cases) ;  Cutler  v.  Winsor 
(1828),  6  Pick.  (Mass.)  335,  17 
Am.  Dec.  385  (vessel) ;  Day  v. 
Stevens  (1883),  88  N.  C.  83,  43 
Am.  Rep.  732;  Putnam  v.  Wise 
(1841),  1  Hill  (N.  Y.)  234,  37  Am. 
Dec.  309;  Donnell  v.  Harshe 
(1877),  67  Mo.  170,  Burd.  Cas.  30n, 
Gilm.  Cas.  63;  Reynolds  v.  Pool 
(1881),  84  N.  C.  37,  37  Am.  Rep. 
607,  Burd.  Cas.  30n;  Blue  v.  Leath- 
ers (1853),  15  111.  32;  Logan  v. 
Mill  Co.  (1904),  14  Okla.  402,  79 
Pac.  103;  Wagner  v.  Buttles 
(1913),  151  Wis.  668,  139  N.  W. 
425,  Ann.  Cas.  1914  B,  144;  Cedar- 
berg  v.  Guernsey  (1899),  12  S.  Dak. 
77,  80  N.  W.  159;  Williams  v.  Rog- 
ers (1898),  110  Mich.  .418,  68  N.  W. 
240;  Bradley  v.  Ely  (1900),  24  Ind. 
App.  2,  56  N.  E.  44,  79  Am.  St.  R. 
251,  Gilm.  Cas.  10  (farming  on 
shares) ;  Hagenbeck  v.  Arena  Co. 
(1893),  59  Fed.  14;  Pulliam  v. 
Schimpf  (1893),  100  Ala.  362,  14 
So.  488;  McDonough  v.  Bullock 
(1874),  2  Pears.  (Pa.)  191  (land- 
owner who  furnishes  site,  and  show 
or  shooting-gallery  proprietor  who 
furnishes  means  of  amusement,  and 
divide  proceeds) ;  Dutcher  v.  Buck 


75 


§§84,85]  LAW   OF  PARTNERSHIP 

§84.  VI.  Agreements  to  share  losses  only. — An  agreement 
to  share  losses  or  expenses  only  does  not  usually  constitute  a 
partnership.  Thus,  an  agreement  between  two  railroad  com- 
panies that  any  injury  to  persons  or  goods  on  the  line  of  either 
shall  be  borne  by  the  company  on  whose  road  it  occurs,  and 
that  when  the  place  of  injury  cannot  be  determined  the  loss 
shall  be  borne  by  both  in  the  proportions  in  which  they  share 
the  through  rates  for  carriage,  does  not  make  the  companies 
partners.19 

II.  OF  SO-CALLED  QUASI-PARTNERSHIPS,  OR,  MORE  PROPERLY,  OF 

LIABILITY  AS  A  PARTNER  WHEN  No  PARTNERSHIP 

ACTUALLY  EXISTS. 

§  85.  Of  partnerships  as  to  third  persons. — Whenever  there 
is  a  partnership  as  between  the  parties, — and  this,  as  has  been 
seen,  is  the  only  true  partnership, — there  is  also  necessarily  a 
partnership  as  to  third  persons,  with  its  incidental  rights  and 
liabilities. 

It  is,  however,  entirely  settled  that  a  given  individual  may 
be  made  subject  to  the  liabilities  of  a  partner  when  in  fact,  as 
between  himself  and  the  persons  with  whom  he  was  supposed 
to  be  a  partner,  no  partnership  existed  or  was  intended.  This 
presumed  relation  is  sometimes,  though  inaccurately,  spoken  of 
as  a  partnership  as  to  third  persons  to  distinguish  it  from  the 
'partnership  between  the  parties.  It  is,  however,  strictly  not  a 
partnership  at  all,  for  it  does  not  follow  because  one  person 
is  held  liable  to  another  as  a  partner  that  the  same  conclusion 
involves  a  finding  that,  as  between  himself  and  his  alleged  part- 
ners, a  partnership  existed  with  its  consequent  rights  and  obli- 
gations. 

Two  distinct  grounds  of  liability  as  a  partner  to  third  persons 
have  at  times  been  insisted  upon  and  require  consideration.  One, 
now  practically  obsolete,  was  that  of  sharing  profits;  the  other, 

(1893),    96   Mich.    160,   55   N.   W.  19  See     Aigen     v.     Eailroad     Co. 

676,    20    L.    E.    A.    776,    Mechem's  (1882),    132    Mass.    423;    Irvin    v. 

Gas.      749;      McAlpine     v.     Millen  Railroad  Co.  (1879),  92  111.  103,  34 

(1908),  104  Minn.  289,  116  N.  W.  Am.  Rep.  116. 
583   (lumbering  contracts). 

76 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§  86 

as  important  now  as  ever,  is  that  of  holding  oneself  out  as  a 
partner. 

1.  Of  Sharing  Profits. 

§  86.  Sharing  profits  was  formerly  a  ground  of  liability  to 
third  persons  as  a  partner. — It  was  laid  down  at  an  early 
period  in  England,  in  two  cases,  Grace  v.  Smith,20  and  Waugh 
v.  Carver,81  which  have  since  become  famous  in  the  law  of  part- 
nership, that  all  persons  who  shared  the  profits  of  a  business 
were  liable  as  partners  therein,  although  as  between  themselves 
no  partnership  existed  or  was  contemplated. 

The  rule  and  the  reason  given  for  it  are  well  illustrated  in 
the  second  of  these  cases.  It  appeared  that  one  Carver  and 
his  son,  who  were  established  in  business  at  Gosport,  had  entered 
into  an  agreement  with  one  Giesler,  who  was  in  the  same  busi- 
ness at  Plymouth,  in  pursuance  of  which  he  was  to  remove  and 
establish  himself  in  the  same  line  of  business. at  Cowes.  Each 
concern  was  to  send  business  to  the  other  when  possible.  In 
consideration  of  the  Carvers'  recommendation  and  support, 
Giesler  agreed  to  pay  them  one-half  of  his  receipts  on  certain 
lines  of  business.  Similarly,  the  Carvers  were  to  pay  him  a 
portion  of  their  receipts  on  certain  lines  of  business.  It  was 
expressly  stipulated  that  neither  concern  was  to  be  liable  for 
the  losses  of  the  other,  and  that  each  was  to  be  separate  and 
distinct  from  the  other,  but  once  in  each  year  the  parties  were 
to  get  together  and  divide  the  proceeds  of  the  business  in  ac- 
cordance with  the  agreed  rates.  There  was  no  common  firm 
name  and  no  holding  out  by  one  of  the  other  as  a  partner. 
Giesler  incurred  indebtedness  in  his  own  name,  to  the  plaintiff, 
who  knew  nothing  of  the  arrangement,  and  for  this  it  was  sought 
to  make  the  Carvers  responsible  as  partners.  Lord  Chief  Jus- 
tice Eyre,  who  delivered  the  opinion  of  the  court,  admitted  that 
it  was  "plain  upon  the  construction  of  the  agreement,  if  it  be 
construed  only  between  the  Carvers  and  Giesler,  that  they  were 

20  Grace  v.  Smith  (1775),  2  Wm.          21  Waugh  v.  Carver  (1793),  2  H. 

Blackstone  998,  Mechem's  Gas.  93,  Blackstone  235,  2  Smith 's  Lead.  Cas. 

Ames'  Cas.  1;  Burd.  Cas.  46,  Gilm.  1316,  Mechem's  Cas.  99,  Ames'  Cas. 

Cas.  17.  6,  Burd.   Cas.  47,  Gilm.  Cas.  19. 

77 


86] 


LAW  OF  PARTNERSHIP 


not,  nor  ever  meant  to  be,  partners."  "They  meant  each  house 
to  carry  on  trade  without  risk  of  each  other,  and  to  be  at  their 
own  loss.  Though  there  was  a  certain  degree .  of  control  at  one 
house,  it  was  without  an  idea  that  either  was  to  be  involved  in 
the  consequences  of  the  failure  of  the  other,  and  without  under- 
standing themselves  responsible  for  any  circumstances  that 
might  happen  to  the  loss  of  either.  That  was  the  agreement  be- 
tween themselves.  But  the  question  is  whether  they  have  not, 
by  parts  of  their  agreement,  constituted  themselves  partners  in 
respect  to  other  persons.  The  case,  therefore,  is  reduced  to  the 
single  point,  whether  the  Carvers  did  not  entitle  themselves  and 
did  not  mean  to  take  a  moiety  of  the  profits  of  Giesler's  house, 
generally  and  indefinitely  as  they  should  arise,  at  certain  times 
agreed  upon  for  the  settlement  of  their  accounts.  That  they 
have  so  done  is  clear  upon  the  face  of  the  agreement;  and  upon 
the  authority  of  Grace  v.  Smith,22  he  who  takes  a  moiety  of  all 


22  In  Grace  v.  Smith,  the  facts 
were  that  Grace  had  sued  Smith 
alone  as  a  secret  partner  with  one 
Eobinson,  for  goods  delivered  to 
the  latter,  who  became  bankrupt 
in  1770.  It  appeared  that  on  March 
30,  1767,  Smith  and  Robinson  had 
formed  a  partnership  for  seven 
years,  but  in  the  following  Novem- 
ber it  was  dissolved  and  due  notice 
was  given.  On  the  dissolution  it 
was  agreed  that  all  the  stock  in 
trade  and  debts  due  the  firm  should 
be  transferred  to  Eobinson;  that 
Smith  was  to  have  back  £4,200 
which  he  brought  into  the  busi- 
ness and  £1,000  for  profits  up  to 
that  time;  that  Smith  was  to  per- 
mit £4,000  of  this  money  to  remain 
as  a  loan  to  Eobinson  for  seven 
years  at  five  per  cent,  and  an  annu- 
ity of  £300  per  annum,  for  all  which 
Eobinson  gave  bond  to  Smith. 
Smith  afterwards  made  further  ad- 
vances until  the  whole  indebtedness 
amounted  to  £7,000,  for  which  a 


new  bond  was  given.  The  plaintiff 
contended  that  this  arrangement 
made  Smith  a  secret  partner,  but 
he  was  held  not  to  be  so  liable. 
Said  De  Grey,  C.  J.:  "The  only 
question  is,  What  constitutes  a  se- 
cret partner?  Every  man  who  has 
a  share  of  the  profits  of  a  trade 
ought  also  to  bear  his  share  of  the 
loss.  And  if  any  one  takes  part  of 
the  profit  he  takes  a  part  of  that 
fund  on  which  the  creditor  of  the 
trader  relies  for  his  payment.  If 
any  one  advances  or  lends  money 
to  a  trader  it  is  only  lent  on  his 
general  personal  security.  It  is  no 
specific  lien  upon  the  profits  of  the 
trade,  and  yet  the  lender  is  gener- 
ally interested  in  those  profits;  he 
relies  on  them  for  repayment.  And 
there  is  no  difference  whether  that 
money  be  lent  de  novo  or  left  be- 
hind in  trade  by  one  of  the  part- 
ners who  retires.  And  whether  the 
terms  of  that  loan  be  kind  or  harsh 
makes  also  no  manner  of  difference. 


78 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§  87 

the  profits  indefinitely  shall,  by  operation  of  law,  be  made  liable 
to  losses,  if  losses  arise,  upon  the  principle  that,  by  taking  a 
part  of  the  profits,  he  takes  from  the  creditors  a  part  of  that 
fund  which  is  the  proper  security  to  them  for  the  payment  of 
their  debts.  That  was  the  foundation  of  the  decision  in  Grace 
v.  Smith,  and  I  think  it  stands  upon  the  fair  ground  of  reason. ' ' 
The  Carvers  were  therefore  held  liable. 

§  87.  Same  subject. — It  does  not  seem  to  have  occurred  to 
the  court  that  the  profits  are  not  the  fund,  that  is,  the  only  or 
chief  fund  to  which  the  creditors  may  resort,  because,  as  will 
be  seen,  whether  there  are  profits  or  not,  the  creditors  may  re- 
sort to  all  of  the  assets  of  the  firm  for  payment,  as  well  as  to 
the  individual  responsibility  of  the  partners.  Neither  was  it 
observed  that  the  very  statement  of  the  rule  involved  an  in- 
consistency. Profits  are  what  is  left  after  the  creditors  are  paid 
and  not  before;  and  therefore  to  take  account  of  profits  as  such 
while  the  creditors  yet  remain  unpaid  was  an  inconsistency. 
Neither  was  it  observed  that  the  rule  often  resulted  in  com- 
pelling one  creditor,  though  for  a  small  amount,  to  stand  liable 
as  a  partner  to  the  other  creditors,  even  in  an  indefinite  amount. 
Whatever  were  the  inconsistencies,  however,  as  they  have  often 
since  been  pointed  out,  this  was  declared  to  be  the  rule,  and  it 
remained  the  rule  in  England  for  many  years,  and  was  adopted 

I  think  the  true  criterion  is  to  in-  to    consider    whether    the   profit    or 

quire  whether  Smith  agreed  to  share  premium  is  certain  and  defined,  or 

the  profits   of  the  trade   with   Bob-  casual,  indefinite,  and  depending  on 

inson,  or  whether  he  only  relied  on  the  accidents  of  trade.     In  the  for- 

those  profits  as  a  fund  of  payment;  mer  case  it  is  a  loan  (whether  usu- 

a    distinction    not    more    nice    than  rious  or  not  is  not  material  to  the 

usually  occurs  in  questions  of  trade  present    question),    in    the    latter   a 

or  usury.     The  jury  have  said  that  partnership.      The    hazard    of    loss 

this    is    not    payable    out    of    the  and  profit  is  not  equal  and  recipro- 

profits,    and    I    think    there    is    no  cal,   if   the  lender   can  receive   only 

foundation     for     granting     a     new  a  limited  sum  for  the  profits  of  his 

trial."     Gould,  J.,  of  same  opinion.  loan,  and  yet  is  made  liable  to  all 

Blackstone,  J. :   "Same  opinion.     I  the  losses,  all  the  debts  contracted 

think     the     true     criterion      (when  in     the     trade,     to     any     amount." 

money  is  advanced  to  a  trader)   is  Nares,  J.,  of  same  opinion. 

79 


§  88]  LAW  OF  PARTNERSHIP 

thence  into  the  United   States,  and  has  been  reiterated  and 
affirmed  in  many  American  cases.23 

Under  this  rule  it  mattered  little  what  was  the  name  or  nature 
of  the  arrangement  under  which  the  parties  were  related,  or 
however  strongly  they  asserted  their  intention  not  to  be  part- 
ners, or  to  what  devices  they  had  recourse  to  avoid  such  a  con- 
clusion ;  if  they  shared  profits  as  profits,  as  the  expression  was, 
they  were  declared  to  be  partners  as  to  third  persons  and  liable 
as  such. 

§  88.  Of  the  case  of  Cox  v.  Hickman. — In  1860  a  case  arose 
in  the  English  courts  which  required  a  re-examination  of  the 
ground  of  liability  by  sharing  profits.  This  was  the  case  of 
Cox  v.  Hickman,24  decided  in  the  English  House  of  Lords.  The 
parties  sought  to  be  charged  as  partners  were  not  partners 
inter  sese  and  never  intended  to  be,  but  they  were  entitled  to 
share  in  the  net  income  of  a  business  as  creditors  until  their 
claims  were  paid. 

The  facts  were  that  the  firm  of  Smith  &  Son,  becoming  finan- 
cially embarrassed,  turned  their  property  over  to  trustees  ap- 
pointed by  their  creditors.  The  trustees  were  to  carry  on  the 
business  under  the  name  of  "The  Stanton  Iron  Company,"  and 
divide  the  net  income,  which  was  always  to  be  considered  the 
property  of  Smith  &  Son,  among  the  creditors  until  their  claims 
were  paid,  and  then  the  property  was  to  be  restored  to  Smith 
&  Son.  Hickman  sold  goods  to  the  trustees  in  the  name  adopted 
by  them  for  the  business,  and  drew  bills  on  them  which  were 
accepted  in  that  name- by  one  of  the  managing  trustees.  These 
bills  not  being  paid,  the  action  was  brought  to  charge  the  cred- 
itors as  partners. 

23  See  Dob  v.  Halsey    (1819),  16  Stoekt.    Ch.    (N.    J.)    469,    64   Am. 

Johns.  (N.  Y.)  34,  8  Am.  Dec.  293;  Dec.  464;  Pratt  v.  Langdon  (1867), 

Bromley  v.  Elliot  (1859),  38  N.  H.  97  Mass.  97,  93  Am.  Dec.  61;  Polk 

287,    75    Am.    Dec.    182;    Miller   v.  v.     Buchanan      (1857),      5      Sneed 

Hughes    (1818),    1    A.    K.    Marsh.  (Tenn.)   721,  Burd.  Gas.  62. 
(Ky.)  181,  10  Am.  Dec.  719;  Simp-          84 Cox     v.     Hickman     (1860),     8 

son  v.  Feltz   (1826),  1  McCord  Ch.  House    of    Lords     Cases    268,    Me- 

(S.    C.)     213,    16    Am.    Dec.    602;  chem's    Gas.    102,    Ames    Gas.    47, 

Sheridan     v.     Medara      (1855),     2  Burd.  Gas.  65,  Gilm.  Gas.  31. 

80 


WHAT  ACTS   CREATE  A  PARTNERSHIP  [§§  89,90 

The  case  went  through  all  of  the  courts  to  the  House  of  Lords. 
It  was  urged  that  as  they  were  to  share  the  profits  of  a  busi- 
ness which  was  being  carried  on  under  their  control,  the  cred- 
itors thereby  became  liable  as  partners,  and  half  of  the  judges 
were  of  this  opinion;  but  the  Lords  united  in  repudiating  the 
old  and  arbitrary  rule,  and  placed  the  liability  upon  the  ground 
which  has  since  been  maintained  in  England — that  of  mutual 
agency. 

§  89.  Same  subject. — In  the  leading  opinion  of  Lord  Cran- 
worth  it  was  said:  "It  was  argued  that  as  they  would  be  in- 
terested in  the  profits,  therefore  they  would  be  partners.  But 
this  is  a  fallacy.  It  is  often  said  that  the  test,  or  one  of  the 
tests,  whether  a  person  not  ostensibly  a  partner  is  nevertheless 
in  contemplation  of  law  a  partner,  is  whether  he  is  entitled  to 
participate  in  the  profits.  This  no  doubt  is  in  general  a  suffi- 
ciently accurate  test ;  for  a  right  to  participate  in  profits  affords 
cogent,  often  conclusive,  evidence  that  the  trade  in  which  the 
profits  have  been  made  was  carried  on  in  part  for  or  on  behalf 
of  the  person  setting  up  such  a  claim.  But  the  real  ground 
of  the  liability  is  that  the  trade  had  been  carried  on  by  per- 
sons acting  on  his  behalf.  When  that  is  the  case,  he  is  liable 
to  the  trade  obligations,  and  entitled  to  its  profits,  or  to  a  share 
of  them.  It  is  not  strictly  correct  to  say  that  his  right  to  share 
in  the  profits  makes  him  liable  to  the  debts  of  the  trade.  The 
correct  mode  of  stating  the  proposition  is  to  say  that  the  same 
thing  which  entitles  him  to  the  one  makes  him  liable  to  the  other, 
namely,  the  fact  that  the  trade  has  been  carried  on  on  his  be- 
half, i.  e.,  that  he  stood  in  the  relation  of  principal  towards  the 
persons  acting  ostensibly  as  the  traders,  by  whom  the  liabilities 
have  been  incurred,  and  under  whose  management  the  profits 
have  been  made. ' ' 

§90.  Same  subject. — "Taking  this  to  be  the  ground  of  lia- 
bility as  a  partner,"  continued  Lord  Cranworth,  "it  seems  to 
me  to  follow  that  the  mere  concurrence  of  creditors  in  an  ar- 
rangement under  which  they  permit  their  debtor,  or  trustees 
for  their  debtor,  to  continue  his  trade,  applying  the  profits  in 
discharge  of  their  demands,  does  not  make  them  partners  with 
Mech.  Part.— 6  81 


§  91]  LAW  OF   PARTNERSHIP 

their  debtor  or  the  trustees.  The  debtor  is  still  the  person  solely 
interested  in  the  profits,  save  only  that  he  has  mortgaged  them 
to  his  creditors.  He  receives  the  benefit  of  the  profits  as  they 
accrue,  though  he  has  precluded  himself  from  applying  them  to 
any  other  purpose  than  the  discharge  of  his  debts.  The  trade 
is  not  carried  on  by  or  on  account  of  the  creditors,  though  their 
consent  is  necessary  in  such  a  case,  for  without  it  all  the  prop- 
erty might  be  seized  by  them  in  execution.  But  the  trade  still 
remains  the  trade  of  the  debtor  or  his  trustees;  the  debtor  or 
the  trustees  are  the  persons  by  or  on  behalf  of  whom  it  is  car- 
ried on. ' '  The  defendants  were  therefore  held  not  liable. 

§  91.  Effect  of  Cox  v.  Hickman  on  English  law. — In  a  case 
arising  not  long  afterwards  it  became  essential  to  determine,  in 
the  language  of  Blackburn,  J.,  "what  really  was  the  effect  of 
the  decision  of  the  House  of  Lords  in  Cox  v.  Hickman,"  and  he 
said:  "Prior  to  that  decision,  the  dictum  of  De  Grey,  C.  J., 
in  Grace  v.  Smith,  'that  every  man  who  has  a  share  of  the  profits 
of  a  trade  ought  also  to  bear  a  share  of  the  loss, '  had  been  adopted 
as  the  ground  of  judgment  in  Waugh  v.  Carver,  where  it  was 
laid  down  'that  he  who  takes  a  moiety  of  all  profits  indefinitely 
shall,  by  operation  of  law,  be  made  liable  to  losses  if  losses  arise, 
upon  the  principle  that,  by  taking  a  part  of  the  profits,  he  takes 
from  the  creditors  a  part  of  that  fund  which  is  the  proper 
security  to  them  for  the  payment  of  their  debts. '  This  decision 
has  never  been  overruled.  The  reasoning  on  which  it  proceeds 
seems  to  have  been  generally  acquiesced  in  at  the  time;  and 
when,  more  recently,  it  was  disputed,  it  was  a  common  opinion 
(in  which  I  for  one  participated)  that  the  doctrine  had  become 
so  inveterately  part  of  the  law  of  England  that  it  would  re- 
quire legislation  to  reverse  it.  In  Cox  v.  Hickman  the  creditors 
of  a  trade  had  agreed  that  their  debtor's  trade  should  be  car- 
ried on  for  the  purpose  of  paying  them  their  debts  out  of  the 
profits,  and  the  composition  deed  to  which  they  were  parties 
secured  to  them  a  property  in  the  profits.  The  rule  laid  down 
in  Waugh  v.  Carver,  if  logically  followed  out,  led  to  the  con- 
clusion that  all  the  creditors  who  assented  to  this  deed,  and  by 
so  doing  agreed  to  take  the  profits,  were  individually  liable  as 
partners;  but  when  it  was  sought  to  apply  the  rule  to  such  an 

82 


[§92 

extreme  case,  it  was  questioned  whether  the  rule  itself  was  really 
established.  There  was  a  very  great  difference  of  opinion 
amongst  the  judges  who  decided  the  case  in  its  various  stages 
below,  and  also  amongst  those  consulted  in  the  House  of  Lords. 
In  the  result,  the  House  of  Lords — consisting  of  Lord  Campbell, 
C.,  and  Lords  Brougham,  Cranworth,  "Wensleydale  and  Chelms- 
ford — unanimously  decided  that  the  creditors  were  not  part- 
ners. The  judgments  of  Lord  Cranworth  and  of  Lord  Wensley- 
dale bear  internal  evidence  of  having  been  written.  Lord  Camp- 
bell, C.,  and  Lords  Brougham  and  Chelmsford  said  a  few  words 
expressing  their  concurrence.  It  is  therefore  in  the  written 
judgments,  and  more  especially  in  the  elaborate  judgment  of 
Lord  Cranworth,  that  we  must  look  for  the  ratio  decidendi. 
"I  think  that  the  ratio  decidendi  is,  that  the  proposition  laid 
down  in  "Waugh  v.  Carver — viz.,  that  a  participation  in  the 
profits  of  a  business  does  of  itself,  by  operation  of  law,  con- 
stitute a  partnership — is  not  a  correct  statement  of  the  law  of 
England ;  but  that  the  true  question  is,  as  stated  by  Lord  Cran- 
worth, whether  the  trade  is  carried  on  on  behalf  of  the  person 
sought  to  be  charged  as  a  partner,  the  participation  in  the  profits 
being  a  most  important  element  in  determining  that  question, 
but  not  being  in  itself  decisive ;  the  test  being,  in  the  language 
of  Lord  Wensleydale,  whether  it  is  such  a  participation  of  profits 
as  to  constitute  the  relation  of  principal  and  agent  between  the 
person  taking  the  profits  and  those  actually  carrying  on  the 
business."25 

§  92.  Effect  of  Cox  v.  Hickman  in  the  United  States. — In  the 

United  States  the  case  of  Cox  v.  Hickman  has  been  quite  gen- 
erally followed.26     In  many  of  the  states  earlier  decisions  fol- 

25 Bullen  v.  Sharp  (1865),  L.  E.  1  ling   v.    Gaskill    [1897],    App.    Gas. 

Com.  PI.  86,  Ames'  Cas.  67,  Burd.  575. 

Cas.  71,  Gilm.   Cas.   36.     See,  also,  26  See,    for    example,    Beecher    v. 

Mollwo  v.  Court  of  Wards    (1872),  Bush  (1881),  45  Mich.  188,  7  N,  W. 

L.  E.  4  Pr.  Coun.  App.  419,  Ames'  785,    40    Am.    Rep.    465,    Meehem's 

Cases  79;   Pooley  v.  Driver  (1876),  Cas.  118,  Gilm.  Cas.  49;  Butcher  v. 

5    Ch.    Div.    458,    Ames'    Cases    87.  Buck    (1893),  96  Mich.  160,  55  N. 

See,  also,  now  the  English  Partner-  W.  676,  20  L.  R.  A.  776,  Meehem's 

ship  Act,  §2,  Appendix,  post;  Gos-  Cas.    749;    McDonald    v.    Campbell 

83 


§93] 


LAW   OP   PARTNERSHIP 


lowing  the  old  English  cases  have  been  overruled,  though  in 
others,  and  notably  in  New  York27  and  Pennsylvania,28  the 
courts  have  held  the  former  rule  to  be  too  deeply  rooted  in  their 
jurisprudence  to  be  overthrown,  except  by  legislative  action. 

The  Uniform  Partnership  Act,  as  has  been  seen,29  adopts  the 
result  of  Cox  v.  Hickman  by  providing  that  no  inference  of 
partnership  shall  be  drawn  merely  from  the  fact  that  a  person 
receives  a  share  of  the  profits  of  a  business  in  payment  of  a 
debt  by  installments  or  otherwise,  or  in  payment  of  wages  or 
rent  or  of  an  annuity  to  the  widow  or  representative  of  a  de- 
ceased partner,  or  in  payment  of  interest  on  a  loan,  though 
the  amount  varies  with  the  profits,  or  in  consideration  of  the 
sale  of  the  good-will  of  a  business  or  other  property,  whether 
the  payment  be  made  in  installments  or  otherwise. 

§  93.  Same  subject — Beecher  v.  Bush. — In  a  case  in  Michi- 
gan so  in  which  the  question  arose,  the  court,  speaking  through 


(1905),  96  Minn.  87,  104  N.  W. 
760,  Gilm.  Gas.  81;  Jackson  v. 
Hooper  (1909),  76  N.  J.  Eq.  185, 
74  Atl.  130;  Wade  v.  Hornaday 
(1914),  92  Kan.  293,  140  Pac.  870. 

27  See    Leggett   v.    Hyde    (1874), 
58    N.   Y.    272,    17    Am.    Kep.   244, 
Burd.  Gas.  50,  Gilm.  Gas.  22;  Hack- 
ett   v.   Stanley    (1889),    115   N.  Y. 
625,  22  N.  E.   745,  Burd.   Gas.  57, 
Gilm.  Gas.  27. 

28  See   Wessels  v.   Weiss    (1895), 
166  Pa.  490,  31  Atl.  247,  Burd.  Gas. 
55.     In  North  Carolina,  see  South- 
ern Fertilizer  Co.  v.  Beams  (1890), 
105  N.  C.  283,  11  S.  E.  467;   Cos- 
sack v.  Burgwyn  (1893),  112  N.  C. 
304,  16  S.  E.  900.     In  Georgia,  see 
Brandon  v.  Conner  (1903),  117  Ga. 
759,  45  S.  E.  371,  63  L.  E.  A.  260. 
In  Connecticut,  see  Parker  v.  Can- 
field   (1870),  37  Conn.  250,  9  Am. 
Rep.  317.     In  Texas,  see  Cothran  v. 
Marmaduke  (1883),  60  Tex.  370. 

29  Sec.   7,   subd.  4,   given  in  full 


ante,  §  80.  Compare  Furnace  Eun 
Co.  v.  Heller  (1911),  84  Ohio  St. 
201,  95  N.  E.  771;  Purvis  v.  But- 
ler (1891),  87  Mich.  248,  49  N.  W. 
564;  Webb  v.  Hicks  (1898),  123  N. 
Car.  244,  31  S.  E.  479,  in  all  of 
which  partnership  liability  was  im- 
posed on  the  creditors. 

30  Beecher  v.  Bush  (1881),  45 
Mich.  188,  7  N.  W.  785,  40  Am.  Rep. 
465,  Mechem's  Gas.  118,  Gilm.  Gas. 
49.  In  this  case  it  appeared  that 
Beecher  owned  a  hotel.  One  Wil- 
liams proposed  to  "hire  the  use"  of 
it  and  pay  Beecher  therefor,  from 
day  to  day,  a  sum  "equal  to  one- 
third  of  the  gross  receipts  and  gross 
earnings."  Beecher  accepted  and 
the  arrangement  went  into  effect. 
Williams  bought  goods  of  Bush 
which  he  did  not  pay  for,  and  this 
action  was  to  hold  Beecher  liable  for 
them  as  a  partner  with  Williams  by 
force  of  the  arrangement.  Held,  not 
liable. 


84 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§94 

Mr.  Justice  Cooley,  after  reviewing  many  of  the  decisions  botL 
prior  and  subsequent  to  Cox  v.  Hickman,  says :  ' '  It  is  needless 
to  cite  other  cases.  They  cannot  all  be  reconciled,  but  enough 
are  cited  to  show  that,  in  so  far  as  the  notion  ever  took  hold  of 
the  judicial  mind  that  the  question  of  partnership  or  no  part- 
nership was  to  be  settled  by  arbitrary  tests,  it  was  erroneous 
and  mischievous,  and  the  proper  corrective  has  been  applied. 
Except  when  one  allows  the  public  or  individual  dealers  to  be 
deceived  by  the  appearances  of  partnership  where  none  exists, 
he  is  never  to  be  charged  as  a  partner,  unless  by  contract  and 
with  intent  he  has  formed  a  relation  in  which  the  elements  of 
partnership  are  to  be  found.  And  what  are  these?  At  the 
very  least  the  following:  Community  of  interest  in  some  law- 
ful commerce  or  business,  for  the  conduct  of  which  the  parties 
are  mutually  principals  of  and  agents  for  each  other,  with  gen- 
eral powers  within  the  scope  of  the  business,  which  powers, 
however,  by  agreement  between  the  parties  themselves,  may  be 
restricted  at  option,  to  the  extent  even  of  making  one  the  sole 
agent  of  the  others  and  of  the  business. ' ' 

No  better  statement  of  the  modern  rule  has  been  found  than 
this  one. 

§94.  Same  subject — Harvey  v.  Childs. — In  another  case81 
upon  the  subject  which  arose  in  Ohio  it  is  said:    "What  shall 

The  Uniform  Partnership  Act  ment  of  the  theatre.  Upon  a  dis- 
adopts  the  result  of  Beecher  v.  Bush.  agreement  between  the  parties,  B 
Sec.  7,  subd.  4.  Compare  Leavitt  v.  ejected  L  and  took  possession  of  the 
Windsor  Land  &  Inv.  Co.  (1893),  4  premises.  L  filed  a  bill  in  equity  for 
C.  C.  A.  425,  54  Fed.  439.  In  this  restoration  to  possession,  and  it  was 
case,  B  owned  a  theatre  building,  held  that  there  was  equitable  juris- 
which,  by  an  instrument  describing  diction,  the  contract  between  the 
the  parties  thereto  as  "lessor"  and  parties  being  in  legal  effect  a  con- 
"  lessee",  was  "rented"  to  L  for  tract  of  partnership, 
five  years.  For  "rental",  L  agreed  31  Harvey  v.  Childs  (1876),  28 
to  pay  B  a  fixed  sum  per  year,  an  Ohio  St.  319,  22  Am.  Kep.  387,  Me- 
additional  sum  for  heating  and  light-  chem  's  Cas.  129.  In  this  case  one 
ing,  and  one-half  the  net  annual  Potter  was  buying  hogs  for  ship- 
profits  as  "additional  rent."  The  merit.  He  had  not  money  enough, 
parties  agreed  to  share  the  losses  and  tried  to  get  Childs  to  supply  it 
equally.  L  was  given  full  manage-  and  take  an  interest  in  the  venture, 

85 


§  95]  LAW  OF  PARTNERSHIP 

be  regarded,  as  to  third  persons,  as  a  test  of  partnership  between 
parties  who  did  not  consider  themselves  to  be  partners  and  who 
have  done  nothing  to  estop  them  from  denying  that  they  are 
such,  has  been  much  discussed  by  courts  and  elementary  writers, 
and  the  problem  seems  to  be  one  of  difficult  solution.  It  is  need- 
less to  review  here  the  numerous  cases  on  the  subject;  a  state- 
ment of  results  is  sufficient. 

"No  little  difficulty  has  been  experienced  in  determining  the 
meaning  and  limits  of  phrases  that  have  been  recognized  as 
tests  of  a  partnership  in  such  cases,  and  in  their  application 
to  the  varying  cases  that  arise.  The  effort  has  been  to  draw  a 
distinct  line  between  cases  where  one  has  a  community  of  in- 
terest in  the  profits  of  a  business,  as  distinguished  from  those 
where  one  is  entitled  to  receive  a  sum  of  money  out  of  the  profits 
as  a  creditor,  or  a  sum  proportioned  to  a  quantum  of  profits, 
or  a  share  of  the  profits  as  a  compensation  for  services  or  labor. 

"Although  a  partnership  may  be  said  to  rest  upon  the  idea 
of  a  communion  of  profits,  nevertheless  the  foundation  of  the 
liability  of  one  partner  for  the  acts  of  another  is  the  relation 
they  sustain  to  each  other,  as  being  each  'principal  and  agent. 
That  relation,  it  would  seem,  then,  constitutes  the  true  test  of 
a  partnership  liability,  and  rests  upon  the  just  foundation  that 
the  joint  liability  was  incurred  on  the  express  or  implied  au- 
thority of  the  party  sought  to  be  charged." 

§95.  Same  subject. — "But  if  the  relation  of  principal  and 
agent  be  regarded  as  the  test  of  a  partnership  and  consequent 

but    Childs   refused.      It    was    then  formed  part  of  the  lot  which  Childs 

agreed  that  Childs  should  let  Potter  sold  in  pursuance  of  his  arrangement 

have    money    to    complete    his    pur-  with  Potter.     There  were  no  profits, 

chases,  and  Childs  was  to  take  pos-  but  a  loss,  and  Potter  made  it  good 

session  of  the  hogs  as  security,  sell  to  Childs.    Potter  did  not  pay  Har- 

them,    reimburse   himself    and   have  vey,  and  Harvey  sued  Childs  to  hold 

half  of  the  net  profits;  but  that  in  him  liable  as  a  partner  with  Potter 

any  event   Potter   should  pay  back  in  the  purchase.    Held,  that  he  was 

all    of    Childs'    advances.      Without  not    liable.      See,    also,    Clifton    v. 

the    knowledge     of    Childs,    Potter  Howard    (1886),  89  Mo.   192,   1   S. 

bought  on  his  own  credit  a  lot  of  W.  26,  58  Am.  Rep.  97;   Button  v. 

hogs   of  Harvey,   the  plaintiff,  but  Railway  Co.    (1919),  104  Kan.  282, 

did  not  pay  for  them.     These  hogs  178  Pac.  418. 

86 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§  96 

joint  liability, ' '  continued  the  court,  ' '  the  question  still  remains : 
What  shall  be  deemed  sufficient  evidence  of  that  relation,  or 
to  raise  the  implication  of  authority  to  incur  the  liability  in 
question?  To  this  end  numerous  tests  have  been  supposed  to 
exist;  but  the  best  considered  and  least  objectionable  is  that  of 
a  community  of  interest  in  the  profits  of  a  business  or  trans- 
action as  a  principal  or  proprietor.  But  this  test  is  valuable 
as  a  rule  chiefly  because  it  evinces  a  relation  between  the  parties, 
where  each  may  reasonably  be  presumed  to  act  for  himself  and 
as  agent  for  the  others,  and  to  that  extent  establishes  the  fact 
that  the  liability  was  incurred  on  the  authority  of  all  so  par- 
ticipating in  the  profits.  Participation  in  the  profits  of  a  busi- 
ness, however,  cannot  be  regarded  as  a  rule  so  universal  and 
unrelenting  as  to  be  unjustly  applied  to  a  case  where  a  debt 
is  incurred  by  one  who  cannot  be  said  to  be  acting,  in  the  par- 
ticular transaction,  as  the  agent  or  on  behalf  of  the  party  sought 
to  be  charged.  Therefore,  on  principle,  the  true  test  of  a  part- 
nership, at  last,  is  left  to  be  that  of  the  relation  of  the  parties 
as  principal  and  agent,  to  be  proved  by  any  competent  evidence ; 
for  where  they  sustained  that  relation,  a  joint  liability  may  be 
said  to  have  been  incurred  by  the  authority  or  on  behalf  of  each 
of  the  parties  so  related.  The  tendency  of  the  more  modern 
authorities,  both  English  and  American,  is  to  this  conclusion." 

§  96.  Same  subject — Meehan  v.  Valentine. — The  test  of  mu- 
tual agency  has  not,  however,  proven  entirely  satisfactory  to  all 
of  the  courts.  It  is  said,  and  not  without  reason,  that  this  is 
to  invert  the  logical  order  of  events  and  turn  the  result  into  the 
cause — that  mutual  agency  is  the  result  of  partnership  rather 
than  that  partnership  is  the  result  of  mutual  agency.  Thus  it 
is  said  in  a  leading  case  32  in  the  supreme  court  of  the  United 

32  Meehan    v.    Valentine     (1891),  loaned  C.  &  Co.  $10,000  on  the  agree- 

145  IT.  S.  611,  12  Sup.  Ct.  972,  36  ment  that  he  was  to  have,  in  addi- 

L.  ed.  835,  Mechem  's  Gas.  135,  Burd.  tion  to  the  interest,  one-tenth  of  the 

Gas.  80,  Gilm.  Gas.  45.    This  was  an  net  profits  over  a  given  sum.     The 

action  brought  to  charge  the  estate  arrangement  was   annually  renewed 

of  one  P.,  deceased,  of  which  V.  was  for  four  years.     Six  per  cent,  was 

executor,  on  the  ground  that  P.  was  the  legal  rate  of  interest  in  Mary- 

a  partner  in  the  firm  of  C.  &  Co.    P.  land  at  the   time.     In  one  of  the 

87 


§97] 


LAW  OP  PARTNERSHIP 


States:  "As  has  been  pointed  out  in  later  English  cases,  the 
reference  to  agency  as  a  test  of  partnership  was  unfortunate  and 
inconclusive,  inasmuch  as  agency  results  from  partnership  rather 
than  partnership  from  agency.  Such  a  test  seems  to  give  a 
synonym  rather  than  a  definition ;  another  name  for  the  con- 
clusion rather  than  a  statement  of  the  premises  from  which  the 
conclusion  is  to  be  drawn.  To  say  that  a  person  is  liable  as  a 
partner,  who  stands  in  the  relation  of  principal  to  those  by  whom 
the  business  is  actually  carried  on,  adds  nothing  by  way  of 
precision,  for  the  very  idea  of  partnership  includes  the  rela- 
tion of  principal  and  agent." 

§97.  Same  subject. — In  this  case  the  court  further  say: 
"In  the  present  state  of  the  law  upon  this  subject,  it  may  per- 
haps be  doubted  whether  any  more  precise  general  rule  can  be 
laid  down  than  that  those  persons  are  partners  who  contribute 
either  property  or  money  to  carry  on  a  joint  business  for  their 
common  benefit,  and  who  own  and  share  the  profits  thereof  in 


years,  he  was  guaranteed  ten  per 
cent,  interest,  or,  if  the  profits  ex- 
ceeded $10,000,  he  was  to  have,  in 
lieu  of  interest,  ten  per  cent,  of  the 
profits.  P.  received,  under  this 
agreement,  about  $1,500  the  first 
year;  but  afterwards,  as  it  was  diffi- 
cult to  determine  the  exact  profits, 
it  was  agreed  that  he  should  have 
$1,000  each  year  on  account,  leaving 
the  exact  amount  to  be  determined 
on  the  final  settlement  of  the  whole 
business.  This  arrangement  was 
continued  for  four  years,  when  C.  & 
Co.  failed,  owing  large  amounts  to 
the  plaintiff  and  others.  The  court 
held  that  this  was  a  loan;  that  P. 
was  a  creditor  and  not  a  partner,  and 
consequently  that  the  action  could 
not  be  maintained. 

As  has  been  already  seen,  (ante, 
§80),  the  Uniform  Partnership 
Act  (Sec.  7,  subd.  4),  provides  that 
no  inference  of  partnership  shall  be 


drawn  merely  from  the  fact  that  a 
person  receives  a  share  of  the  profits 
of  a  business  ' '  as  interest  on  a  loan, 
though  the  amount  of  payment  vary 
with  the  profits  of  the  business." 

See,  also,  Johnson  v.  Carter 
(1903),  120  Iowa  355,  94  N.  W.  850. 

It  is  said  in  some  of  the  older 
cases,  where  the  amount  of  com- 
pensation exceeds  the  legal  rate  of 
interest,  that  it  must  be  either  part- 
nership or  usury,  and  that,  as  the 
courts  will  not  hear  parties  assert 
that  they  intended  usury,  the  result 
must  be  partnership.  But  this  view 
no  longer  prevails;  the  rate  may  be 
usurious,  with  its  consequent  penal- 
ties, but  the  agreement  does  not,  foi 
that  reason  alone,  create  partner- 
ship. Compare  Bloxham  v.  Pell 
(1775),  2  Wm.  Bl.  999;  Arnold  v. 
Angell  (1875),  62  N.  Y.  508;  Aus- 
tin v.  Neil  (1898),  62  N.  J.  L.  462, 
41  Atl.  834. 


88 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§98 

certain  proportions.  If  they  do  this,  the  incidents  or  conse- 
quences follow,  that  the  acts  of  one  in  conducting  the  partner- 
ship business  are  the  acts  of  all ;  that  each  is  agent  for  the  firm 
and  for  the  other  partners ;  that  each  receives  part  of  the  profits 
as  profits,  and  takes  part  of  the  fund  to  which  the  creditors 
of  the  partnership  have  a  right  to  look  for  the  payment  of  their 
debts;  that  all  are  liable  as  partners  upon  contracts  made  by 
any  of  them  within  the  scope  of  the  partnership  business;  and 
that  even  an  express  stipulation  between  them  that  one  shall 
not  be  so  liable,  though  good  between  themselves,  is  ineffectual 
as  against  third  persons.  And  participating  in  profits  is  pre- 
sumptive, but  not  conclusive,  evidence  of  partnership." 

§  98.  Same  subject. — Notwithstanding  these  differences  of 
opinion  as  to  the  test  of  mutual  agency,  it  is  entirely  clear  that 
the  old  rule  that  sharing  profits  as  profits  made  one  a  partner 
is  overthrown.  It  seems  also  to  be  true  that  the  real  test  is  that 
suggested  by  the  definition  given  in  the  first  section,  namely, 
that  there  must  be  a  community  of  interest — a  co-ownership — 
a  joining  as  principals,  in  carrying  on  a  business  for  their  joint 
profit.  This  community  of  interest  as  principals  in  the  trans- 
action necessarily  excludes  mere  servants  or  agents  who  are  to 
share  profits  by  way  of  contingent  compensation;  lenders  who 
are  to  share  in  the  profits  merely  by  way  of  contingent  interest ; 
landlords  who  are  to  take  a  share  of  the  profits  merely  by  way 
of  rent;  and  any  other  class  of  creditors  whose  interest  is  not 
in  the  business  itself,  who  have  no  common  ownership  of  the 
business,  its  capital  or  its  stock  in  trade,  who  do  not  own  the 
profits,  if  there  are  any,  who  have  no  voice  or  part  in  controlling 
the  management  of  the  business,  but  who  are  simply  entitled  to 
be  paid  out  of  the  profits,  if  there  are  any,  some  claim  or  demand 
which  they  have  against  the  real  principals  in  the  business.83 

33  See,  also,  Parchen  v.  Anderson  First   Nat.   Bank    (1894),   43   Neb. 

(1885),  5  Mont.  438,  5  Pac.  588,  51  84,  61  N.  W.  112;  Boston  Smelting 

Am.  Rep.  65;   Vinson  v.  Beveridge  Co.  v.  Smith  (1880),  13  R.  I.  27,  43 

(1879),  3  MacArth.  (D.  C.)  597,  36  Am.    Rep.    3;     Culley    v.    Edwards 

Am.  Rep.  113;  Sodiker  v.  Applegate  (1884),  44  Ark.  423,  51  Am.  Rep. 

(1884),  24  W.  Va.  411,  49  Am.  Rep.  614;  Jeter  v.  Burgwyn  (1893),  113 

252,    Gilm.    Gas.    5;    Waggoner    v.  N.  Car.  157,  18  S.  E.  113;  Shepard 

89 


§§  99,  100]  LAW  OF  PARTNERSHIP 

As  has  been  seen,34  the  Uniform  Partnership  Act  is  entirely  in 
accord  upon  this  point.86 

It  is  apparent  that  the  subdivision  now  'under  consideration 
is  not  properly  to  be  deemed  a  ground  for  the  creation  of  a 
gwewi-partnership.  It  remains,  therefore,  to  consider  the  other, 
already  mentioned,  namely — 

2.  Of  Holding  Out  as  a  Partner — Nominal  Partner — Estoppel. 

§  99.  Person  may  become  liable  as  a  partner  by  holding  him- 
self out  as  one. — A  person  who  is  not  actually  a  partner  may 
render  himself  liable  as  though  he  were  one,  by  so  conducting 
himself  as  to  reasonably  induce  third  persons  to  believe  that  he 
is  a  partner  and  to  act  upon  that  belief.  This  rule  is  based  upon 
the  same  principle  as  that  which  has  been  discovered  in  the  law 
of  Agency, — that  a  person  may  become  liable  for  the  acts  of 
another  who  was  not  really  his  agent,  if  he  has  so  conducted 
himself  as  to  lead  others  reasonably  to  believe  that  such  person 
was  his  agent.  It  is  a  case  in  which  the  principle  of  estoppel 
applies.  Estoppel  is  that  which  stops,  bars,  or  prevents.  More 
specifically,  for  our  purposes,  it  is  that  principle  of  the  law 
which  operates  to  prevent  a  man,  who,  by  some  express  or  im- 
plied representation,  has  led  another  reasonably  and  in  good 
faith  to  rely  upon  the  existence  of  a  certain  state  of  facts,  from 
afterwards  denying,  to  the  prejudice  of  such  other,  that  such 
a  state  of  facts  did  exist.  In  the  law  of  partnership  it  is  com- 
monly spoken  of  as  a  liability  incurred  by  holding  oneself  out 
or  permitting  oneself  to  be  held  out  as  a  partner. 

§100.  It  involves  some  express  or  implied  representa- 
tion by  the  person  in  question  that  he  is  a  partner,  in  reason- 
able and  bona  fide  reliance  upon  which  the  person  now  seeking 
to  hold  him  liable  as  such  has  extended  a  credit,  or  otherwise 
changed  his  position,  in  such  a  manner  that  he  will  now  be  pre- 
judiced if  the  representation  be  denied. 

T.  Pratt  (1876),  16  Kan.  209;  Beard  v.   Hornaday    (1914),  92  Kan.  293, 

v.  Rowland  (1905),  71  Kan.  873,  81  140  Pac.  870. 

Pae.   188;    Weiland  v.   Sell    (1910),  34  See  ante,  §80. 

83  Kan.  229,  109  Pac.  771;   Wade  35  Sec.  7  (4). 

90 


WHAT  ACTS  CREATE  A  PARTNERSHIP        [§§  101,  102 

The  representation  must  ordinarily  be  one,  not  of  matters  of 
law  or  of  opinion  merely,  but  of  fact, — in  this  case,  the  assumed 
fact  that  the  person  sought  to  be  held  was  a  partner  as  he  was 
represented  to  be. 

The  representation  may  be  either  that  the  person  in  question 
is  a  partner  in  an  actually  existing  firm,  or  that  he  is  a  partner 
with  one  or  more  persons  where  no  partnership  between  any  of 
them  actually  exists. 

§  101.  Same  subject. — The  Uniform  Partnership  Act  declares 
the  rule  as  follows:  "When  a  person,  by  words  spoken  or  writ- 
ten, or  by  conduct,  represents  himself,  or  consents  to  another 
representing  him  to  any  one,  as  a  partner  in  an  existing  part- 
nership or  with  one  or  more  persons  not  actual  partners,  he  is 
liable  to  any  such  person  to  whom  such  representation  has  been 
made,  who  has,  on  the  faith  of  such  representation,  given  credit 
to  the  actual  or  apparent  partnership,  and  if  he  has  made  such 
representation  or  consented  to  its  being  made  in  a  public  man- 
ner he  is  liable  to  such  person,  whether  the  representation  has 
or  has  not  been  made  or  communicated  to  such  person  as  giving 
credit  by  or  with  the  knowledge  of  the  apparent  partner  mak- 
ing the  representation  or  consenting  to  its  being  made. ' '  36 

§102.  Same  subject — What  facts  must  exist? — In  order  to 
the  existence  of  this  liability,  two  main  facts  must  be  found : 

1.  The  condition  or  thing  relied  upon  as  evidence  of  the  hold- 
ing out  must  have  been  caused  either  by  the  party  to  be  charged 
as  partner,  in  person,  or  by  another  with  his  knowledge  and 
consent ; 87  and 

2.  The  party  seeking  to  hold  him  liable  as  a  partner  must, 
in  the  exercise  of  reasonable  prudence  and  good  faith,  have  re- 
lied upon  such  condition  or  thing  and  been  misled  by  it.38 

36  Sec.  16.    Subd.  1.  that  he  held  himself  out  as  a  part- 

37  See  Lott  v.   Young    (1901)    48  ner,  unless  he  did  so  before  the  con- 
C.  C.  A.  654,  109  Fed.  798.  tract  -was  entered  into.    It  also  fol- 

38  In  Lindley  on  Partnership  (vol.  lows  that  no  person  can  be  fixed  with 
I,  p.  43)   it  is  said:      "It  follows  liability  on  the  ground  that  he  has 
*     *     *     that   a   person    cannot   be  been  held  out  as  a  partner,  unless 
liable  on  a  contract,  on  the  ground  two   things   concur,   viz.:    first,   the 

91 


§102] 


LAW  OF  PARTNERSHIP 


The  condition  or  thing  relied  upon  may  be  an  act  or  a  rep- 
resentation or  a  mere  failure  to  act.  No  particular  form  or 
ceremony  is  necessary.  The  appearance  or  condition  relied  upon 
need  not  have  been  caused  by  the  party  in  person,  but  may  have 
been  caused  by  others  with  his  knowledge  and  consent.  It  may 
consist  in  a  mere  omission  to  act  under  such  circumstances  as 
to  reasonably  lead  the  person  who  relied  to  believe  that  the  per- 
son sought  to  be  held  assented  to  the  representation.39 


alleged  act  of  holding  out  must 
have  been  done  either  by  him  or  by 
his  consent,  and  secondly,  it  must 
have  been  known  to  the  person  seek- 
ing to  avail  himself  of  it.  In  the 
absence  of  the  first  of  these  requi- 
sites, whatever  may  have  been  done 
cannot  be  imputed  to  the  person 
sought  to  be  made  liable;  and  in  the 
absence  of  the  second,  the  person 
seeking  to  make  him  liable  has  not 
in  any  way  been  misled. ' '  See,  also, 
Hahlo  v.  Mayer  (1890),  102  Mo.  93, 
13  S.  W.  804,  22  Am.  St.  E.  753, 
Mechem's  Gas.  179;  Fletcher  v. 
Pullen  (1889),  70  Md.  205,  16  Atl. 
887,  14  Am.  St.  E.  355,  Mechem's 
Gas.  166,  Gilm.  Gas.  100;  Morgan 
v.  Farrel  (1890),  58  Conn.  413,  20 
Atl.  614,  18  Am.  St.  E.  282,  Me- 
ehem's  Gas.  171;  Van  Kleeck  v. 
Hammell  (1891),  87  Mich.  599,  49 
N.  W.  872,  24  Am.  St.  E.  182; 
Thompson  v.  First  National  Bank 
(1883),  111  U.  S.  529,  4  Sup.  Ct. 
689,  23  L.  ed.  507,  Mechem's  Gas. 
771,  Burd.  Gas.  96,  Gilm.  Gas.  96; 
Lincoln  v.  Craig  (1889),  16  E.  I. 
564,  18  Atl.  175;  Cornhauser  v. 
Eoberts  (1890),  75  Wis.  554,  44 
N.  W.  744;  United  States  Wood 
Preserv.  Co.  v.  Lawrence  (1915),  89 
Conn.  633,  95  Atl.  8. 

39  Thus  in  Fletcher  v.  Pullen, 
supra,  there  was  evidence  that  the 
defendant,  to  his  knowledge,  had 


been  advertised  in  the  newspapers  as 
a  partner  with  another  person.  Said 
the  court:  "Having  knowledge  of 
these  advertisements,  it  was  his  duty 
to  deny  the  partnership  if  he  wished 
to  escape  liability.  But  what  was 
he  to  do  and  how  much?  We  do  not 
say  that  he  was  under  a  legal  obliga- 
tion to  publish  a  repudiation  of  the 
partnership  in  the  same  newspapers, 
or  in  any  other,  though  this  would 
seem  to  be  a  very  obvious  and  the 
most  efficient  mode  of  proclaiming 
such  denial,  and  the  fact  that  he 
failed  to  do  so  was  a  circumstance 
to  go  to  the  jury.  But  we  take  it 
that  the  rule  upon  this  subject 
stated  by  a  very  eminent  jurist  is 
reasonable  and  just:  'If  one  is  held 
out  as  a  partner,  and  he  knows  it, 
he  is  chargeable  as  one,  unless  he 
does  all  that  a  reasonable  and  hon- 
est man  should  do,  under  similar  cir- 
cumstances, to  assert  and  manifest 
his  refusal,  and  thereby  prevent  in- 
nocent parties  from  being  misled.' 
Parsons  on  Partnership,  134. ' ' 

[The  difficulty  in  Fletcher  v.  Pul- 
len, is  to  find  the  connection  between 
the  acts  which  the  plaintiff  relied 
upon,  but  which  the  defendant  did 
not  know  of,  and  the  acts  which  the 
defendant  knew  of,  but  which  the 
plaintiff  neither  knew  of  nor  relied 
upon.] 

On  the  other  hand,  in  Munton  v. 


92 


WHAT  ACTS  CREATE  A  PARTNERSHIP 


[§103 


§  103.  Same  subject — Who  may  enforce  liability. — It  is  not 

necessary  that  the  condition  or  appearance  shall  have  been  known 
to  persons  generally;  it  is  enough,  but  also  essential,  that  it 
was  known  to  the  party  deceived  by  it.40  The  representation 


Eutherford  (1899),  121  Mich.  418, 
'80  N.  W.  112,  where  it  was  con- 
tended that  Mrs.  Rutherford  had 
been  advertised  in  a  newspaper  as  a 
partner  with  a  Mr.  Beckwith,  and 
the  trial  court  had  instructed  the 
jury  that  it  was  her  duty,  if  not  a 
partner,  to  see  that  this  advertise- 
ment was  promptly  and  unmis- 
takably denied,  and  that  failing  in 
this  she  would  be  estopped  to  deny 
the  partnership,  the  supreme  court 
said:  "The  instruction  was  errone- 
ous. Mrs.  Eutherford  was  under 
no  legal  or  moral  obligation  to  pub- 
lish a  denial  of  this  newspaper  story. 
Any  one  who  saw  fit  to  deal  with 
Mr.  Beckwith,  relying  on  this  item, 
did  so  at  his  peril.  If  she  had  been 
shown  the  article,  had  assented  to  it, 
and  credit  had  been  given  on  the 
strength  of  such  assent,  the  rule  of 
estoppel  would  have  applied.  There 
being  no  evidence  that  she  author- 
ized or  assented  to  it,  there  is  no 
room  for  the  application  of  the 
rule." 

So  where  a  wife's  name  was, 
without  her  authority,  included  in 
the  list  of  partners  on  the  letter- 
heads of  the  firm  in  which  her  hus- 
band was  a  partner,  and  she  com- 
plained to  the  partners  about  it  and 
requested  that  it  be  discontinued 
and  they  promised  her  that  it  would 
be,  it  was  held  that  no  inference  of 
her  consent  could  be  drawn  where 
the  partners  continued  the  use  of 
her  name  without  her  knowledge  or 
consent  and  in  violation  of  their 


promise.  Eittenhouse  v.  Leigh 
(1880),  57  Miss.  697.  Compare 
Anfenson  v.  Banks  (1917),  180  Iowa 
1066,  163  N.  W.  608,  L.  E.  A. 
1918  D,  482. 

Diligence  in  ascertaining  and 
denying  a  report  that  one  is  a  part- 
ner cannot  be  insisted  upon  where 
there  is  no  evidence  that  he  knew 
anything  about  such  a  report. 
Campbell  v.  Hastings  (1874),  29 
Ark.  512. 

It  surely  cannot  be  true  that  a 
person  is  bound  to  heed  or  deny 
every  idle  and  baseless  statement  or 
rumor  that  is  circulated  concerning 
him.  The  test  must  be  whether, 
under  all  the  circumstances,  con- 
sidering the  time,  place  and  person 
making  the  statement,  the  failure  to 
deny  it  may  fairly  and  reasonably 
be  deemed  to  be  evidence  of  an  ac- 
quiescence in  it. 

40  Clearly  the  party  cannot  be 
held  liable  as  a  partner  by  estoppel 
except  to  those  who  knew  of  the 
holding  out  and  relied  upon  it. 
Thompson  v.  First  Nat.  Bank 
(1884),  111  U.  S.  529,  4  Sup.  Ct. 
689,  28  L.  ed.  507,  Mechem's  Gas. 
771,  Burd.  Gas.  96,  Gilm.  Gas.  96; 
Hahlo  v.  Mayer  (1890),  102  Mo.  93, 
13  S.  W.  804,  22  Am.  St.  E.  753,  Me- 
chem's  Gas.  179;  Fletcher  v.  Pullen, 
supra;  Webster  v.  Clark  (1894),  34 
Fla.  637,  16  So.  601,  43  Am.  St.  E. 
217,  27  L.  E.  A.  126;  Dubos  v. 
Jones  (1894),  34  Fla.  539,  16  So. 
392;  Knard  v.  Hill  (1893),  102  Ala. 
570,  15  So.  345;  Wood  v.  Pennell 


93 


§  104]  LAW  OF  PARTNERSHIP 

need  not  have  been  made  to  the  particular  person  alone  who  re- 
lied upon  it.  It  may  have  been  made  to  each  of  a  group  of  persons 
of  which  he  was  one,  and  he  may  have  been  the  only  one  who 
acted  upon  it.  It  need  not  have  been  made  directly  to  the 
person  deceived:  if  it  came  to  him  by  natural,  direct  and  rea- 
sonably to  be  expected  channels  and  he  reasonably  relied  upon 
it,  it  is  enough.  It  need  not  have  been  the  only  thing  which 
influenced  his  action;  it  is  enough  if  he  relied  upon  it  in  his 
acting,  even  though  other  things  may  also  have  contributed  to 
influence  him.  The  person  who  made  the  representation  need 
not,  of  course,  have  actually  intended  to  influence  any  body's 
action ;  if  what  he  did  was  naturally  and  directly  calculated  to 
influence  action  and  in  fact  did  so,  it  is  enough.  But  the  party 
seeking  to  enforce  the  liability  must  have  exercised  reasonable 
prudence,  must  have  acted  in  good  faith,  and  must  have  been 
actually  deceived  by  the  condition  or  appearance.  If  he  knew, 
or  ought  to  have  known,  the  true  state  of  facts,  or  if  he  did  not 
rely  upon  the  appearance  or  condition,  or  if  he  did  not  know 
of  it  at  the  time  he  acted,  he  has  no  cause  of  complaint.41 

§  104.  In  a  leading  case  42  it  is  said :    ' '  The  law  on  this 

subject,  well  established  by  authority,  may  be  stated  thus :  The 
ground  of  liability  of  a  person  as  partner  who  is  not  so  in  fact 
is  that  he  has  held  himself  out  to  the  world  as  such,  or  has  per- 
mitted others  to  do  so,  and  by  reason  thereof  is  estopped  from 
denying  that  he  is  one  as  against  those  who  have  in  good  faith 
dealt  with  the  firm  or  with  him  as  a  member  of  it.  But  it  must 
appear  that  the  person  dealing  with  the  firm  believed,  and  had 
a  reasonable  right  to  believe,  that  the  party  he  seeks  to  hold 
as  a  partner  was  a  member  of  the  firm,  and  that  the  credit 
was,  to  some  extent,  induced  by  this  belief.  It  must  also  ap- 
pear that  the  holding  out  was  by  the  party  sought  to  be  charged, 

(1863),  51  Me.  52;  Sheldon  v.  Bige-  brought  to  Ms   notice  as  would  be 
low  (1902),  118  Iowa  586,  92  N.  W.  certain  to  excite  inquiry  in  the  mind 
701.  of  any  prudent  man,  and  the  means 
41  In  Morgan  v.  Farrcl,  supra,  the  of  ascertaining  the  truth  were  read- 
court   held    that   the   party    seeking  ily  accessible  but  not  used,  the  party 
to  enforce  the  liability  must   show  could  not  recover, 
that  he  exercised  good  faith  and  due          See  also  Anfenson  v.  Banks,  supra, 
diligence    to    know   the   truth ;    and          42  Fletcher  v.  Pullen,  supra. 
that     if     such     circumstances     are 

94 


WHAT  ACTS   CREATE  A  PARTNERSHIP         [§§  105,  106 

or  by  his  authority,  or  with  his  knowledge  or  assent.  This, 
where  it  is  not  the  direct  act  of  the  party,  may  be  inferred 
from  circumstances,  such  as  advertisements,  shop  bills,  signs  or 
cards,  and  from  various  other  acts  from  which  it  is  reasonable 
to  infer  that  the  holding  out  was  with  his  authority,  knowledge 
or  assent." 

§  105.  Same  subject — Holding  out  to  the  world. — It  -vas  at 
one  time  thought  that  there  might  be  "a  holding  out  to  the 
world,"  so  that  any  one  who  had  given  credit  might  recover, 
even  though  he  knew  nothing  of  the  holding  out  at  the  time 
he  extended  the  credit ;  **  but  this  notion  has  long  since  been 
exploded.44  An  actual  partner,  like  an  undisclosed  principal, 
may  be  held,  although  the  person  who  gave  the  credit  was  igno- 
rant of  his  existence ;  but  a  person  who  was  not  actually  a  part- 
ner can  be  held  only  by  those  who  were  in  fact  deceived  by  his 
appearing  as  a  partner. 

It  is,  of  course,  true  that  there  may  be  such  general,  wide- 
spread and  unqualified  representation  of  partnership  as  to  jus- 
tify a  jury  in  finding  an  actual  partnership,  against  one  who 
denies  that  he  was  a  partner,  and  who  may,  in  fact,  never  have 
intended  to  become  one;  but  that  is  not  the  matter  now  under 
consideration. 

§  106.  Same  subject — Methods  of  holding  out. — The  methods 
by  which  one  may  be  held  out  as  a  partner  are,  of  course,  too 
numerous  for  complete  enumeration.  Among  the  most  common 
are  knowingly  permitting  one's  name  to  appear  in  the  firm 
name,  or  on  signs,  letter-heads,  advertisements,  or  in  the  list 
of  partners,  and  the  like,  or  knowingly  permitting  oneself  to 
be  referred  to  as  a  partner,  and  the  like.46 

43  See  Poillcra  v.  Secor  (1875),  61  96;  Hahlo  v.  Mayer  (1890),  102  Mo. 

N.  Y.  456;  Smith  v.  Hill  (1872),  45  93,  13  S.  W.  804,  22  Am.  St.  E.  753, 

Vt.    90,    12   Am.   E.    1»3;    Eizer   v.  Mechem 's  Gas.  179. 

James   (1881),  26  Kan.  221.  45  See    Thompson    v.    First    Nat. 

44 See    Thompson    v.    First    Nat.  Bank  (1884),  111  U.  S.  529,  28  L. 

Bank  (1884),  111  U.  S.  529,  28  L.  ed.  507,  4  Sup.   Ct.   689,  Mechem's 

ed.  507,  4   Sup.  Ct.   689,  Mechem 'a  Gas.  771,  Burd.  Gas.  96,  Gilm.  Gas. 

Cas.  771,  Burd.  Gas.  96,  Gilm.  Gas.  96;    Fletcher  v.   Pullen    (1889),  70 

95 


§§  107,  108]  LAW  OF  PARTNERSHIP 

For  a  known  partner  to  retire  from  a  firm  and  give  no  notice 
of  that  fact  to  those  who  have  known  of  the  existence  of  the 
firm,  has  the  same  effect,  as  will  be  seen  hereafter.46 

§107.  Same  subject — Evidence  admissible. — The  burden  of 
proving  the  liability  as  a  partner  is  upon  him  who  asserts  it. 
This  proof  may  be  made  by  any  kind  of  evidence  having  a 
legitimate  tendency  to  that  end.  Thus  it  may  be  established  not 
only  by  direct  evidence,  but  by  the  admissions,  acts  or  declara- 
tions of  the  party  sought  to  be  charged  known  to  and  reasonably 
relied  upon  by  the  plaintiff.  It  cannot,  however,  be  established 
by  showing  a  general  reputation  that  the  party  was  a  partner, 
unless  he  can  be  shown  to  be  responsible  for  such  reputation. 

Whether  the  party  charged  has  held  himself  out  as  a  part- 
ner, or  has  permitted  it  to  be  done,  is  a  question  of  fact  ordi- 
narily to  be  determined  by  the  jury ;  *7  but  where  the  facts  are 
not  disputed  and  only  one  inference  can  be  fairly  drawn  from 
them  the  court  will  decide  it. 

§  108.  Same  subject — The  effect. — A  person  may  thus  become 
liable  as  though  he  were  a  partner  by  "holding  out,"  usually 
in  contract  but  also  in  tort  where  the  tort  is  one,  which,  like 
deceit,  acting  upon  invitation,  and  the  like,  may  naturally  and 
directly  result  from  the  holding  out ; 48  but  he  is  not  thereby 

Md.  205,  16  Atl.  887,  14  Am.  St.  E.  Speer  v.  Bishop  (1874),  24  Ohio  St. 
355,  Mechem's  Gas.  166,  Gilm.  Gas.  598.  Compare  Ihmsen  v.  Lathrop 
100;  Hahlo  v.  Mayer  (1890),  102  (1883),  104  Pa.  365. 
Mo.  93,  13  S.  W.  804,  22  Am.  St.  E.  46  See  ^post,  Chap.  XVI. 
753,  Meehem's  Gas.  179;  In  re  47 Fletcher  v.  Pullen  (1889),  70 
Krueger  (1871),  2  Low.  66,  Me-  Md.  205, .16  Atl.  887,  14  Am.  St.  E. 
chem's  Gas.  183;  Evens  &  Howard  355,  Mechem's  Gas.  166,  Gilm.  Gas. 
Fire  Brick  Co.  v.  Hadfield  (1896),  100;  Seabury  v.  Crowell  (1890),  51 
93  Wis.  665,  68  N.  W.  468,  Me-  N.  J.  L.  103,  52  id.  413,  16  Atl.  84, 
chem's  Gas.  783,  Burd.  Gas.  110;  11  L.  E.  A.  136. 
Thayer  v.  G-oss  (1895),  91  Wis.  90,  48  See  Jewison  v.  Dieudonne 
64  N.  W.  312,  Mechem's  Gas.  492,  (1914),  127  Minn.  163,  149  N.  W. 
Burd.  Gas.  102;  In  re  Fraser  20;  Sherrod  v.  Langdon  (1866),  21 
[1892],  2  Q.  B.  633,  Mechem's  Gas.  Iowa  518,  Burd.  Gas.  112,  but  not 
781,  Burd.  Gas.  108.  such  torts,  e.  g.,  negligent  injuries, 
See,  also,  Tanner  Engine  Co.  v.  and  the  like,  which  are  not  the  re- 
Hall  (1888),  86  Ala.  305,  5  So.  584;  suit  of  the  plaintiff's  reliance  upon 

96 


WHAT  ACTS  CREATE  A  PARTNERSHIP  [§  109 

made  a  partner  as  to  other  persons  than  those  relying  upon 
the  condition  or  appearance  for  which  he  is  thus  held  respon- 
sible, nor  does  he  acquire  the  rights  or  obligations  of  a  partner 
as  between  himself  and  his  alleged  copartners. 

Whether  he  is  to  be  held  liable  alone  or  in  connection  with 
his  reputed  partner  must  depend  upon  the  acts  of  both.  If  the 
person  with  whom  he  was  held  out  as  a  partner  was  ignorant 
of  it  and  did  not  concur  in  it,  he  could  not  be  held  liable.  If, 
on  the  other  hand,  he  concurred  or  co-operated  in  the  holding 
out  of  the  other,  both  may  be  held  liable.49 

It  must  also  be  borne  in  mind  that  though  a  partnership  ac- 
tually exists  with  certain  bounds  or  limits,  one  or  more  partners 
may  become  liable  to  third  persons  beyond  those  bounds  or 
limits,  if  they  hold  themselves  out  as  partners  in  a  more  en- 
larged capacity  than  that  fixed  as  between  the  partners  them- 
selves. 

§109.  The  Uniform  Partnership   Act  provides  that — 

"  (a)  When  a  partnership  liability  results,  [that  is,  where  he 
has  been  held  out  as  a  partner  in  an  actually  existing  firm],  he  is 
liable  as  though  he  were  an  actual  member  of  the  partnership. 

"  (&)  When  no  partnership  liability  results,  he  is  liable  jointly 
with  the  other  persons,  if  any,  so  consenting  to  the  contract  or 
representation  as  to  incur  liability,  otherwise  separately. ' ' 50 

With  respect  of  his  power  to  bind  his  reported  partners,  that 
Act  provides: 

"'When  a  person  has  been  thus  represented  to  be  a  partner  in 
an  existing  partnership,  or  with  one  or  more  persons  not  actual 
partners,  he  is  an  agent  of  the  persons  consenting  to  such  rep- 
resentation to  bind  them  to  the  same  extent  and  in  the  same 
manner  as  though  he  were  a  partner  in  fact,  with  respect  to 
persons  who  rely  upon  the  representation.  Where  all  the  mem- 
bers of  the  existing  partnership  consent  to  the  representation,  a 
partnership  act  or  obligation  results ;  but  in  all  other  cases  it  is 

the   holding   out.      Stables   v.   Eley  271,  104  Fed.  449,  52  L.  E.  A.  675. 

(1825),  1  Car.  &  P.  614,  Ames'  Gas.  49  See  Scarf  v.  Jardine  (1882),  L. 

142,    is    therefore    unsound,    as    has  E.  7  App.  Gas.  345,  Mechem's  Gas. 

been  often  pointed  out.     See  Smith  484,  Burd.  Gas.  101. 

v.  Bailey  [1891],  2  Q.  B.  403;  Shap-  60  Sec.  16,  subd.  1. 
ard  v.   Hynes    (1900),   45   C.   C.   A. 

Mech.  Part. — 7  97 


§§  110,  111]  LAW  OP  PARTNERSHIP 

the  joint  act  or  obligation  of  the  person  acting  and  the  persons 
consenting  to  the  representation. ' '  61 

§  110. Whether  the  effect  of  the  estoppel  is  anything 

more  than  a  means  to  personal  liability,  e.  g.,  whether  the  prop- 
erty of  the  ostensible  partners  is  primarily  liable  to  the  creditors 
of  the  ostensible  partnership,  is  a  question  considered  in  a  later 
section.62  It  will  there  be  seen  that  while  some  cases  confine 
the  effect  to  personal  liability,  others  hold  that  the  property  is 
implicated  also. 

The  effect  of  appearances  of  partnership  where  none  exists 
upon  the  defences  or  set-offs  which  may  be  made  in  legal  actions, 
will  be  considered  in  later  sections.63 

It  must  be  kept  in  mind,  however,  as  already  stated,  that 
estoppel  is  usually  merely  a  method  of  imposing  a  liability  -as 
though  the  parties  were  partners:  it  does  not  make  them  part- 
ners in  fact,  or  give  them  generally  the  rights  of  partners  among 
themselves,  or  affect  them  generally  with  the  disabilities  under 
which,  as  actual  partners,  they  might  be  placed.  Thus,  the  mere 
fact  that  two  persons,  not  in  fact  partners,  so  hold  themselves  out 
as  partners  in  the  brokerage  business  that  they  could  be  con- 
sidered such  by  their  creditors,  is  not  a  bar  to  an  action  brought 
by  one  of  them  only  to  recover  commissions,  merely  because  if 
they  had  been  partners  both  must  have  joined  in  the  action.64 

§  111.  Under  the  national  bankruptcy  act,  it  has  been 

said  that  the  Act  applies  only  to  actual  partnerships  and  not 
to  those  resting  only  on  estoppel;  certainly  not,  where  the  es- 
toppel affects  part  only  or  affects  the  creditors  in  a  different 
way.85 

51  Sec.  16,  subd.  2.  55  See  In  re  Pinson  (1910),  180 

52 See  post,  §§  459,  460.  Fed.  787;  In  re'Kenney  (1899),  97 

63  See  post,  §327;  §340  et  seq.;  Fed.  554;  Lott  v.  Young  (1901),  48 

Willey  v.  Bank  (1904),  141  Cal.  508,  C.  C.  A.  654,  109  Fed.  798;  Buffalo 

75  Pac.  106.  Milling  Co.  v.  Lewisburg  Dairy  Co. 

M  See  Wneelock  v.  Zevitas  (1918),  (1908),  159  Fed.  319. 

229    Mass.    167,    118    N.    E.    279; 

Bishop    v.    Hall     (1857),    9    Gray 

(Mass.)  430. 


98 


CHAPTER  VI 


OF     SOME     INCIDENTS     OF     PARTNERSHIP— PARTNERSHIP 
ARTICLES,  FIRM  NAME,  GOOD  WILL,  PART- 
NERSHIP  PROPERTY. 


§  112.  In  general. 

I.  OF  ARTICLES  OF  PARTNERSHIP. 

113.  Of  the  necessity  of  articles. 

114.  Of  the  scope  of  articles. 

115.  Of    the    construction    of    ar- 

ticles. 

116.  Of  waiving  or  enlarging  ex- 

press conditions  by  con- 
duct. 

117.  Of      continuing     partnership 

under  former  articles. 

118.  Of  the  usual  clauses  in  part- 

nership  articles. 

119.  Of    the    enforcement    of    the 

provisions  —  Arbitration — • 
Specific  performance. 

II.  OF  THE  FIRM  NAME. 

120.  Of  the  need  of  a  firm  name. 

121.  What  name  may  be  adopted. 

122.  Use  of  different  name. 

123.  What    may    be    done    in    the 

firm  name — Executing  con- 
tracts, bonds,  deeds — Ac- 
tions at  law. 

124.  Of   the  firm,   name   as    prop- 

erty. 

125.  126.  Of  the  right  to  the  firm 

name  upon  dissolution. 

III.  OF  THE  GOOD-WILL. 

127.  What  is  meant  by  the  good- 

will. 

128.  Good-will  as  an  asset. 


§  129.  Disposition    of    good-will    on 
dissolution. 

130.  Effect  of  sale— Right  to  use 

firm  name. 

131,  132.       Limitations     resulting 

from  sale  of  good-will  upon 
right  to  carry  on  competing 
business. 

IV.  OF  THE  CAPITAL  OF  THE  FIRM. 

133.  What   constitutes  capital. 

134.  Fixing  amount  and  interests. 

135.  Certificates  or  other  evidence 

of  interest. 

136.  What  may  be  received  as  con- 

tributions to  capital. 

137.  Enforcing      contribution      of 

capital. 

V.  OF  THE  PROPERTY  OF  THE  FIRM. 

1.  Of  Firm  Property   in   General. 

138.  What     may     be     partnership 

property. 

139.  What  constitutes  partnership 

property. 

140.  Property       bought       by 

partner  in  his  own  name. 

141.  Property    used    by    the 

firm. 

142.  Partners'    "lien"    on    prop- 

erty. 

143.  144.  Nature  of  each  partner 's 

interest  in  the  firm  prop- 
erty. 


99 


§§  112, 113] 


LAW  OF  PARTNERSHIP 


145.  Extent  of  each  partner's  in- 

terest. 

146,  147.  The  transfer  of  shares. 
148,  149.       Seizure     of    partner's 

share  by  his  individual 
creditor. 

2.  Of  the  Title  to  Personal 
Property. 

150.  May  be  held  in  firm  name. 

151.  May  be  held  in  name  of  one 

partner  for  the  firm. 

152.  Title    is    in    partners    collec- 

tively. 

3.  Of  the  Title  to  Seal  Estate. 

153.  Older     rule — Legal    title    to 

real  property  cannot  ordi- 
narily be  taken  in  firm 
name. 

154.  But  the  equitable  title  is  in 

the  firm. 


§  155.  Modern  rule  more  liberal — 
Uniform  Partnership  Act. 

156.  When  land  is  partnership 
property. 

157-159.  Land  acquired  dur- 
ing the  partnership. 

160,  161.  Land  acquired  prior 

to  the  partnership. 

162.  Nature  of  partner's  interest 
in  partnership  realty. 

163, 164.  Partnership  realty,  when 
deemed  personal  estate. 

165,  166.  Dower  in  partnership 
land. 

167.  Bona     fide     purchaser     from 

partner  having   legal   title. 

168.  Notice    from    possession 

by  the  firm. 

169.  Interest  of  surviving  partner 

in  firm  realty. 


§  112.  In  general. — A  partnership  having  been  formed,  a 
number  of  subjects  incident  to  its  existence  become  important, 
and  though  they  may  not  all  be  similar  in  their  character  they 
may  appropriately  be  grouped  together  in  one  chapter  for  con- 
sideration. 


I.  OP  ARTICLES  OF  PARTNERSHIP. 

§  113.  Of  the  necessity  of  articles. — As  has  been  stated,  it  is 
desirable,  but  not  usually  indispensable,  to  have  written  evidence 
of  the  agreement  between  the  parties  as  to  the  creation,  continu- 
ance, terms  and  conditions  of  their  partnership.  The  formal 
written  instruments  prepared  in  such  cases  are  spoken  of  as  the 
partnership  articles.  As  between  themselves,  it  is,  in  general, 
possible  for  the  parties  to  fix  their  rights,  duties  and  liabilities, 
as  well  as  the  circumstances  of  the  commencement,  continuance 
and  termination  of  the  partnership,  by  their  agreement;  and 
though,  in  the  absence  of  such  an  agreement,  the  law  will  usually 
determine  these  matters  for  them,  it  is  not  by  any  means  cer- 
tain that  the  legal  conclusions  will  be  the  same  that  the  parties 

100 


SOME  INCIDENTS  OF  PARTNERSHIP  [§  114 

contemplated,  and  it- is  in  any  event  desirable  that  the  oppor- 
tunity for  controversy  be  removed  by  express  stipulation. 

§  114.  Of  the  scope  of  articles. — It  is  not,  however,  usually 
feasible,  by  even  the  most  carefully-drawn  articles,  to  provide 
beforehand  for  every  possible  contingency,  or  to  define  all  the 
rights,  duties  or  liabilities  of  the  partners.  Much  must  of  ne- 
cessity be  understood ;  custom  or  usage  may  be  tacitly  recognized ; 
and  conduct  or  practice  may  add  to  or  modify  that  which  is 
expressed.  It  may  thus  happen  that,  in  a  given  case,  the  body 
of  law  or  rules  which  are  to  govern  the  relations  of  the  partners 
as  between  themselves  is  to  be  gathered  from  a  variety  of  sources. 
As  was  said  in  one  case : l  ' '  The  duties  and  obligations  arising 
from  the  relation  between  the  parties  are  regulated  by  the  ex- 
press contract  between  them  so  far  as  the  express  contract  ex- 
tends and  continues  in  force;  but  if  the  express  contract,  or 
so  much  of  it  as  continues  in  force,  does  not  reach  to  all  those 
duties  and  obligations,  they  are  implied  and  enforced  by  the 
law;  and  it  is  often  matter  to  be  collected  and  inferred  from 
the  conduct  and  practice  of  the  parties  whether  they  have  held 
themselves,  or  ought  or  ought  not  to  be  held,  bound  by  the  par- 
ticular provisions  contained  in  their  express  agreement. ' ' 

In  another  case,2  in  which  the  question  was  whether  the  de- 
fendant was  entitled  to  draw  a  salary  in  half  years  when  there 
were  no  net  profits,  the  court  said:  "This  question  is  open  to 
doubt  if  the  partnership  articles  alone  are  looked  at,  but  its 
determination  does  not  depend  merely  upon  the  construction 
which  would  be  given  to  the  partnership  articles,  taken  by  them- 
selves alone.  It  is  a  general  rule  for  the  construction  of  written 
instruments,  including  statutes,  deeds  and  contracts,  that  when 
the  language  is  open  to  doubt,  and  parties  whose  interests  are 
diverse  have  from  the  outset  adopted  and  acted  upon  a  par- 
ticular construction,  such  construction  will  be  of  great  weight 
with  the  court,  and  will  usually  be  adopted  by  it.3  This  rule 

1  Smith  v.  Jeyes  (1841),  4  Beav-  3  Citing  Stone  v.  Clark,  1  Mete, 
an  (Eng.  Ch.)  505.  378;  Stevenson  v.  Erskine,  99  Mass. 

2  Winchester    v.    Glazier    (1890),  367;   Love  joy  v.  Lovett,  124  Mass. 
152  Mass.  316,  25  N.  E.  728,  9  L.  E.  270,    274;     Chicago    v.    Sheldon,    9 
A.  424.  Wall.  50,  54. 

101 


§§  115,  116]  LAW  OP  PARTNERSHIP 

has  full  force  in  the  construction  of  partnership  articles,  and 
a  practical  construction  given  for  several  years  by  the  partners 
themselves  to  language  which  would  otherwise  be  open  to  doubt 
will  usually  be  accepted  by  the  court  as  conclusive. ' ' 

§115.  Of  the  construction  of  articles. — In  endeavoring  to 
determine  what  the  parties  intended  by  their  express  provisions, 
certain  rules  of  construction  have  been  laid  down  by  the  courts. 
Among  these,  the  most  important  is  that  which  gives  promi- 
nence to  the  general  purpose  and  object  of  the  partnership.  If 
certain  of  the  provisions  of  the  articles  are  capable  of  two  con- 
structions, one  of  which  would  promote  while  the  other  would 
retard  or  defeat  that  general  purpose  or  object,  the  former  con- 
struction is  to  be  preferred;  so  if  powers  claimed  would,  by 
their  exercise,  advance  the  general  object,  their  existence  will  be 
more  readily  inferred  than  if  they  are  obstructive  to  it.  In 
the  same  line  are  the  other  rules  of  construction,  that  a  power 
conferred  is  to  be  deemed  to  have  been  so  conferred  with  a 
view  to  the  benefit  of  all  concerned,  and  hence  that  an  exercise 
of  it  for  the  benefit  of  one  to  the  detriment  of  the  others  was 
not  really  intended,  though  the  words  used  might,  upon  their 
face,  bear  such  a  construction;  and  that  any  provision,  however 
worded,  is,  if  possible,  to  be  so  construed  as  to  prevent  one  part- 
ner from  defrauding  another  in  reliance  upon  its  letter,  but  in 
violation  of  its  spirit.4 

§  116.  Of  waiving  or  enlarging  express  provisions  by  con- 
duct.— Any  written  stipulation,  however  express,  is  capable  of 
being  modified,  superseded  or  abandoned  by  the  consent  of  all 
of  the  partners;  and  this  consent  may  be  shown  not  only  by 
express  words,  but  by  conduct  or  the  established  practice  of 
the  parties.6  But  the  unanimous  consent  of  all  is  necessary,  for 
a  portion  cannot  alter,  modify  or  enlarge  the  contract  of  all. 

In  an  English  case6  it  was  said  by  Lord  Eldon:    "In  ordi- 

4  See  Blissett  v.  Daniel  (1853),  10  5  See  McCall  v.  Moss  (1885),  112 

Hare    (Eng.    Ch.)    493;    Pettyt    v.  111.493. 

Janeson    (1819),  6   Haddock    (Eng.  6  Const  v.  Harris  (1824),  1  Tur.  & 

Ch.)  146.  Rus.  496.     So  in  England  v.  Curling 

102 


SOME   INCIDENTS   OF   PARTNERSHIP  [§  117 

nary  partnerships  nothing  is  more  clear  than  this :  that,  although 
partners  enter  into  a  written  agreement,  stating  the  terms  upon 
which  the  joint  concern  is  to  be  carried  on,  yet  if  there  be  a 
long  course  of  dealing,  or  a  course  of  dealing  not  long,  but  still 
so  long  as  to  demonstrate  that  they  have  all  agreed  to  change 
the  terms  of  the  original  written  agreement,  they  may  be  held 
to  have  changed  those  terms  by  conduct.  For  instance,  if  in 
a  common  partnership  the  parties  agree  that  no  one  of  them 
shall  draw  or  accept  bills  of  exchange  in  his  own  name  without 
the  concurrence  of  the  others,  yet,  if  they  afterwards  slide  into 
a  habit  of  permitting  one  of  them  to  draw  or  accept  bills  without 
the  concurrence  of  the  others,  this  court  will  hold  that  they 
have  varied  the  terms  of  the  original  agreement  in  that  respect." 

§  117.  Of  continuing  partnership  under  former  articles. — 

When  a  partnership  has  existed  under  articles  providing  for 
a  definite  term,  there  may  be  an  oral  agreement  to  extend  it ; 7 
bui,  if,  upon  the  expiration  of  that  term,  the  partnership  is  con- 
tinued without  any  new  agreement,  the  original  articles  will 
in  general  continue  to  regulate  the  rights  and  obligations  of 

(1844),  8  Beavan  129,  it  was  said  pose  of  having  some  addition  or 
by  Lord  Langdale:  "With  respect  alteration  in  the  terms  on  which  they 
to  a  partnership  agreement,  it  is  to  carry  on  business,  provided  those 
be  observed  that,  all  parties  being  additions  or  alterations  be  made 
competent  to  act  as  they  please,  they  with  the  unanimous  concurrence  of 
may  put  an  end  to  or  vary  it  at  any  all  the  partners."  See,  also,  Board- 
moment;  a  partnership  agreement  man  v.  Adams  (1857),  5  Iowa  224, 
is  therefore  open  to  variation  from  Mechem's  Gas.  339;  Scudder  v. 
day  to  day,  and  the  terms  of  such  Ames  (1886),  89  Mo,  496,  14  S.  W. 
variations  may  not  only  be  evi-  525;  Gammon  v.  Huse  (1881),  100 
denced  by  writing,  but  also  by  the  111.  234;  Gage  v.  Parmlee  (1877),  87 
conduct  of  the  parties  in  relation  to  111.  329;  Thrall  v.  Seward  (1865), 
the  agreement  and  to  their  mode  of  37  Vt.  573;  Gregg  v.  Hord  (1889), 
conducting  their  business:  when,  129  111.  613,  22  N.  E.  528;  McCall  v. 
therefore,  there  is  a  variation  and  Moss  (1885),  112  111.  493;  Thomas 
alteration  of  the  terms  of  a  partner-  v.  Lines  (1880),  83  N.  Car.  191. 
ship,  it  does  not  follow  that  there  Compare  Eady  v.  Newton  Coal  Co. 
was  not  a  binding  agreement  at  first.  (1905),  123  Ga.  557,  51  S.  E.  661,  1 
Partners,  if  they  please,  may,  in  the  L.  E.  A.  (N.  S.)  650. 
course  of  the  partnership,  daily  come  1  See  Dickinson  v.  Bold  (1816),  3 
to  a  new  arrangement  for  the  pur-  Desaus.  Eq.  (S.  Car.)  501. 

103 


§  118]  LAW  OF  PARTNERSHIP 

the  partners;  though  the  continuing  partnership  will  usually 
be  deemed  to  be  at  will  merely  and  not  renewed  for  a  similar 
term,  and  therefore  only  such  of  the  old  articles  will  be  deemed 
to  be  in  force  as  are  consistent  with  such  a  partnership.8  The 
original  articles  may  also  survive  changes  in  the  persons  com- 
prising the  firm,  and  be  continued  by  their  adoption  by  the  new 
firm. 

The  Uniform  Partnership  Act  contains  similar  provisions.9  It 
declares,  "  (1)  "When  a  partnership  for  a  fixed  term  or  particular 
undertaking  is  continued  after  the  termination  of  such  term  or 
particular  undertaking  without  any  express  agreement,  the  rights 
and  duties  of  the  partners  remain  the  same  as  they  were  at  such 
termination,  so  far  as  is  consistent  with  a  partnership  at  will. 

"  (2)  A  continuation  of  the  business  by  the  partners  or  such  of 
them  as  habitually  acted  therein  during  the  term,  without  any 
settlement  or  liquidation  of  the  partnership  affairs,  is  prima  facie 
evidence  of  a  continuation  of  the  partnership. ' ' 

§  118.  Of  the  usual  clauses  in  partnership  articles. — The  sub- 
jects most  commonly  covered  by  the  partnership  articles  are: 
(1)  the  nature,  name  and  place  of  the  business;  (2)  the  com- 

8  See      Metcalf e      v.      Bradshaw  of  the  partnership,  may  apply  to  the 

(1893),  145  111.  124,  33  N.  E.  1116,  partnership  at  will  as  well  as  to  the 

36  Am.  St.  E.  478,  Mechem's  Gas.  original     one:       Daw     v.     Herring 

875;  United  States  Bank  v.  Binney  [1892],  1  Ch.  284.    See,  also,  Woods 

(1828),  5  Mason  (U.  S.  C.  C.)  176;  v.  Lamb  (1866),  35  L.  J.  Ch.  309; 

Sangston  v.  Hack   (1879),   52  Md.  Hogg  v.  Hogg  (1877),  35  L.  T.  Eep. 

173;  Bradley  v.  Chamberlin  (1844),  N.  S.  792. 

16  Vt.  613;  Mifflin  v.  Smith  (1827),          The  continuing  partnership,  it  is 

17  Serg.  &  E.   (Pa.)   165;  Stephens  said  in  Jurgens  v.  Ittmann  (1895), 
v.  Orman  (1862),  10  Fla.  9.  47  La.  Ann.  367,  16  So.  952,  is  "one 

Thus,  a  provision  for  doing  cer-  not  resting  on  consent  from  day  to 
tain  acts  within  a  named  period  be-  day,  and  by  force  of  such  daily  re- 
fore  the  termination  of  the  partner-  iterated  consent,  but  a  continuing 
ship,  and  which  therefore  contem-  partnership  subject  to  termination 
plate  a  known  date  for  the  termina-  only  after  notice  and  under  the  rules 
tion,  will  usually  be  inapplicable  to  of  law  relating  to  the  dissolution  of 
the  subsequent  partnership  at  will.  partnerships.  Until  formally  or 
Neilson  v.  Mossend  Iron  Co.  (1886),  legally  dissolved  it  continues  as  a 
11  App.  Gas.  298;  but  a  provision  partnership." 
lespecting  acts  to  be  done  within  a  8  Section  23. 
certain  time  after  the  termination 

104 


SOME  INCIDENTS  OP  PARTNERSHIP          [§§  119,  120 

mencement  and  duration  of  the  partnership;  (3)  the  capital  and 
property  of  the  firm  and  how  and  by  whom  contributed;  (4) 
the  share  of  each  in  the  profits  and  losses;  (5)  the  conduct  and 
powers  of  the  partners;  and  (6)  the  dissolution  and  winding  up 
of  the  firm.  Many  other  subjects  are  introduced  in  special  cases. 
A  form  of  articles  which  may  prove  to  be  suggestive  is  printed 
in  an  appendix. 

§  119.  Of  the  enforcement  of  the  provisions  —  Arbitration  — 
Specific  performance.  —  It  is  customary  to  include  provisions 
for  arbitration  in  case  of  disputes,  and  for  fixing  the  value  of 
shares  by  that  method  in  case  of  the  retirement  of  a  partner. 
Provisions  are  also  frequently  inserted  for  making  offers  to  buy 
or  sell  in  case  of  dissolution  ;  for  giving  indemnity  against  debts 
to  the  retiring  partner;  for  taking  in  new  partners-;  for  per- 
mitting the  representatives  of  a  deceased  partner  to  be  admitted  ; 
for  expelling  a  partner  ;  and  the  like.  Many  of  these  provisions 
can  have  only  a  negative  effect,  for,  as  will  be  more  fully  seen 
hereafter,10  it  is  well  settled  that  agreements  to  become  part- 
ners, agreements  to  continue  a  partnership  for  a  definite  time, 
agreements  to  submit  disputed  matters  to  arbitration,  and  agree- 
ments to  admit  new  partners,  will  not  ordinarily  be  specifically 
enforced  by  the  courts,  but  the  parties  will  be  left  to  such  rem- 
edy as  they  may  find,  if  any,  in  an  action  for  the  breach  of  the 
agreement.  The  execution  of  formal  instruments  clearly  pro- 
vided for  may  sometimes  be  specifically  enforced,  including  even 
the  execution  of  partnership  articles,  where  that  is  necessary  to 
confer  upon  one  party  a  right  to  which  he  is  entitled,  even 
though  the  partnership  thereby  created  may  be  immediately 
dissolved.11 

II.  OP  THE  FIRM  NAME. 

§  120.  Of  the  need  of  a  firm  name.  —  In  the  absence  of  a  stat- 
ute requiring  it,  a  firm  name  is  a  customary  but  not  a  necessary 


§222.  erby  v.  Buntin   (1875),   118   Mass. 

11  See  England  v.  Curling  (1844),  279,   19   Am.   Eep.   459,    Meehem's 

8  Beavan  (Eng.  Ch.)   129;  Buck  v.  Gas.  326;   Tobey  v.  Bristol  County, 

Smith  (1874),  29  Mich.  166,  18  Am.  3  Story  (U.  S.  C.  Ct.)  819. 
Eep.  84,  Meehem's  Cas.  322;   Som- 

105 


§121] 


LAW  OP  PARTNERSHIP 


incident  of  a  partnership.  As  has  been  seen,  the  partnership 
is  not,  in  legal  contemplation,  a  distinct  and  separate  entity, 
but  merely  a  collection  of  individuals  with  whom,  for  most  pur- 
poses, the  law  deals  as  such.  A  firm  name,  therefore,  is  not 
indispensable,12  but  it  is  a  matter  of  convenience  in  identifying 
and  ascertaining  the  individuals  interested;  and  when  a  firm 
name  has  been  adopted,  it  ought  regularly  to  be  used  in  the 
partnership  transactions.  Nevertheless,  as  will  be  seen,  the 
partners  may  acquire  rights  and  incur  liabilities  even  though 
the  firm  name  was  not  used.18 

§  121.  What  name  may  be  adopted. — In  some  states,  as,  for 
example,  in  New  York,  statutes  have  been  enacted  forbidding 
the  use  of  the  name  of  a  person  not  actually  interested  in  the 
firm,  or  the  use  of  the  term  "&  Co."  unless  it  represents  an 
actual  partner.14  Other  statutes  forbid  the  use  of  assumed 
or  fictitious  names  unless  some  prescribed  notice  is  given  or 
public  record  is  made  showing  who  are  the  persons  represented 
by  the  name.15  But  where  no  statute  prevents,  the  partners 


12  See  Meriden  Nat.  Bank  v.  Gal- 
laudet  (1890),  120  N.  Y.  298,  24  N. 
E.  994;   Wright  v.  Hooker    (1854), 
10    N.    Y.    51;    Getchell    v.    Foster 
(1870),   106   Mass.   42;    Haskins  v. 
D'Este  (1882),  133  Mass.  356,  Burd. 
Gas.  135,  Gilm.  Gas.  154. 

13  See  post,  §  121;  §  296,  et  seq. 

14  As  to  the  use  of  the  term  "& 
Co.,"    when    forbidden    by    statute, 
see  Gay  v.  Seibold  (1884),  97  N.  Y. 
472,  49  Am.  Rep.  533;   Sparrow  v. 
Kohn    (1885),  109  Pa.   St.  359,  58 
Am.  Rep.  726;  Wood  v.  Railroad  Co. 
(1878),  72  N.  Y.  196,  28  Am.  Rep. 
125;  Zimmerman  v.  Erhard  (1880), 
83    N.    Y.    74,    38    Am.    Rep.    396; 
Wolfe    v.    Joubert    (1893),    45    La. 
Ann.  1100,  13  So.  806,  21  L.  R.  A. 
772;     National     Bank     v.     Cringan 
(1895),  91  Va.  347,  21   S.  E.   820. 
Where    no   such   statute   exists,   the 
use  of  "&  Co."  raises  no  necessary 


presumption  that  it  represents  a 
partner.  Robinson  v.  Magarity 
(1862),  28  111.  423;  Brennan  v. 
Pardridge  (1887),  67  Mich.  449,  35 
N.  W.  85.  As  to  whether  the  firm 
name  is  such  as  to  import  a  partner- 
ship or  a  corporation,  see  Birming- 
ham Loan  Co.  v.  First  Nat.  Bank 
(1893),  100  Ala.  249,  46  Am.  St. 
Rep.  45;  Clark  v.  Jones  (1888),  87 
Ala.  474,  6  So.  362;  Seymour  v. 
Harrow  Co.  (1886),  81  Ala.  250,  1 
So.  45. 

15  As  to  such  statutes  and  their 
effect,  see  Castle  v.  Graham  (1903), 
87  N.  Y.  App.  Div.  97,  84  N.  Y.  120, 
aff 'd  180  N.  Y.  553,  73  N.  E.  1120; 
Pendleton  v.  Cline  (1890),  85  Gal. 
142,  24  Pac.  659;  Walker  v.  Stim- 
mel  (1906),  15  N.  Dak.  484,  107  N. 
W.  1081;  Guiterman  v.  Wishon 
(1898),  21  Mont.  458,  54  Pac.  566; 
Czatt  v.  Case  (1899),  61  Ohio  St. 


106 


SOME  INCIDENTS  OF  PARTNERSHIP 


[§122 


may  adopt  any  firm  name  they  choose,  so  long  as  it  does  not 
interfere  with  the  rights  of  others.  They  may  thus  use  the 
name  of  a  stranger,  of  a  single  partner  or  of  a  portion  of  the 
partners,  or  they  may  adopt  a  wholly  fictitious  name.  They 
may  have  one  name  for  one  branch  of  their  business  and  a  dif- 
ferent one  for  another  branch;  or  one  name  for  the  business 
at  one  place  and  a  different  one  for  the  business  at  another  place.16 
They  may  also  acquire  a  name  by  usage,  even  though  they  have 
another  fixed  by  the  agreement  of  the  partners. 

§122.  Use  of  different  name. — And  though  they  may  have 
a  regular  firm  name,  they  may  be  bound  by  the  use,  in  a  single 
transaction,  of  some  other  name.17  They  may  change  or  add  to 

392,  55  N.  E.  1004;  Cashin  v.  Filter      Nat.  Bank  (1896),  164  III  83,  45  N. 


(1912),  168  Mich.  386,  134  N.  W. 
482,  Ann.  Caa.  1913  C,  697;  Bolen  v. 
Ligett  (1916),  49  Okla.  788,  154 
Pac.  547,  L.  E.  A.  1916  D,  352; 
Elgin  Jewelry  Co.  v.  Wilson  (1908), 
42  Colo.  270,  93  Pae.  1107;  Garland 
v.  Heckler  (1916),  147  C.  C.  A.  390, 
233  Fed.  504;  Missaukee  Farm  Co. 
v.  Ferris  (1916),  193  Mich.  286,  159 
N.  W.  490.  For  a  somewhat  similar 
statute,  see  National  Bank  v.  Cring- 
an,  supra;  Yale  v.  Taylor  Mfg.  Co. 
(1886),  63  Miss.  598. 

16  See     West     v.     Valley     Bank 
(1856),  6  Ohio  St.  168,  Burd.  Gas. 
132;    Messner  v.   Lewis    (1857),  20 
Tex.  221,  Burd.  Gas.  133. 

17  An  obligation  under  seal  exe- 
cuted by  all  the  members  of  a  firm, 
in  and  for  its  business  and  for  its 
benefit,  binds  the  firm  although  tho 
firm  name  is  not  mentioned,  and  al- 
though it  appears  upon  its  face  to 
be  simply  the  obligation  of  the  part- 
ners contracted  in   their  individual 
names.      Berkshire    Woolen    Co.    v. 
Juillard    (1879),  75  N.  Y.  535,  31 
Am.  Eep.  489,  Mechem's  Gas.  389. 
To  same  effect:     Dreyfus  v.  Union 


E.  408,  Burd.  Gas.  139;  Bouse  v. 
Wallace  (1897),  10  Colo.  App.  93, 
50  Pac.  366.  A  firm  is  bound  by  an 
acceptance  in  an  agent 's  name  which 
it  has  adopted  as  a  firm  name  by  an 
agreement  of  the  partners  to  do 
business  under  the  name  of  such 
agent,  where  it  does  not  appear  that 
the  agent  was  doing  business  also  on 
his  own  account;  but  if  that  fact 
appears,  it  must  be  shown  that  he 
accepted  the  bill  on  account  of  the 
partnership  in  order  to  bind  it. 
Bank  of  Rochester  v.  Monteath 
(1845),  1  Denio  (N.  Y.)  402,  43 
Am.  Dec.  681.  See,  also,  Le  Eoy  v. 
Johnson  (1829),  2  Peters  (U.  S.) 
186;  Eipley  v.  Colby  (1851),  23  N. 
H.  438;  Getchell  v.  Foster  (1870), 
106  Mass.  42;  Uhler  v.  Browning 
(1859),  28  N.  J.  L.  79;  Barcroft  v. 
Haworth  (1870),  29  Iowa  462.  See, 
also,  post,  §§  296-298. 

A  sealed  note  made  to  partners  in 
their  individual  names  may  be  en- 
dorsed by  them  in  the  firm  name. 
Mick  v.  Howard  (1848),  1  Ind.  250, 
Burd.  Gas.  131. 

The  firm  property  may  be  trans- 


107 


§  123]  LAW  OP  PARTNERSHIP 

the  firm  name  at  any  time.  They  may  acquire  rights  in  the 
firm  name  and  transfer  them  in  the  individual  names  of  the 
partners,  and  vice  versa.  Whatever  the  name  used,  it  may  be 
shown  by  parol  evidence  who  the  persons  were  who  were  rep- 
resented by  it. 

§  123.  What  may  be  done  in  the  firm  name — Executing  con- 
tracts, bonds,  deeds — Actions  at  law. — As  a  general  rule,  all 
simple  contracts,  written  or  unwritten,  negotiable  or  non-negoti- 
able, whether  creating  rights  or  imposing  obligations,  may  be 
made  or  taken  in  the  firm  name ; 18  and,  as  will  be  seen,19  one 
partner  has  usually  implied  authority  to  bind  the  firm  by  con- 
tracts made  in  the  firm  name  for  partnership  purposes.  But, 
as  will  also  be  seen,20  one  partner  has  ordinarily  no  implied  au- 
thority to  bind  the  firm  by  executing  in  the  firm  name  bonds, 
deeds  or  other  instruments  under  seal;  and,  in  general,  deeds 
of  conveyance  of  real  estate  cannot,  by  the  older  authorities,  at 
least,  be  made  either  by  or  to  the  firm  in  the  firm  name.  Such 
conveyances  will,  however,  usually  operate  to  convey  an  equi- 
table interest  which  may  be  enforced  in  a  court  of  chancery; 
and  where  a  conveyance  of  real  estate  is  made  to  a  firm  in  the 
name  of  the  firm  which  contains  the  full  name  of  one  or  more 
of  the  partners,  a  legal  title  will  generally  be-  held  to  vest  in 
those  partners  whose  names  appear,  and  equity  will  charge  them 
as  trustees  for  all.21  The  tendency  of  the  later  cases,  as  will 

f erred,  though  each  partner  makes  a  Adam  (1894),  101  Cal.  438,  35  Pac. 
separate  bill  of  sale  of  all  his  in-  1016,  Mechem's  Gas.  799,  Burd.  Gas. 
terest  in  his   own  name,  where  all  163;  Gille  v.  Hunt  (1886),  35  Minn, 
these  bills  of  sale  are  then  delivered  357,  29  N.  W.  2,  Gilm.  Gas.  190. 
together  to  the  grantee.    Twin  City  19  See  post,  §  244. 
Brief  Printing  Co.  v.  Eeview  Pub.  20  See  post,  §§263,264. 
Co.   (1918),  139  Minn.  358,  166  N.  21  A  deed  to  John  Smith  &  Co.  op- 
W.  413,  L.  E.  A.  1918  D,  154.  erates  to  vest  the  entire  legal  title 
18  A    chattel    mortgage    may    be  in    John    Smith   alone.     Winter   v. 
taken  in  the  firm  name.     Hendren  Stock  (1866),  29  Cal.  407,  89  Am. 
v.  Wing  (1895),  60  Ark.  561,  31  S.  Dec.     57;     Moreau     v.     Saffarans 
W.   149,   46   Am.    St.   B.   218,   Me-  (1856),  3  Sneed  (35  Tenn.)  595,  67 
chem's    Gas.    797,    Burd.    Gas.    161,  Am.  Dec.  582.    A  mortgage  of  real 
Gilm.  Gas.  189.     As  to  real  estate  estate  given  to  "Farnham  &  Love- 
mortgage,    see    Woodward    v.    Me-  joy,    of    the    county    of    Hennepin, 

108 


SOME  INCIDENTS  OF  PARTNERSHIP 


[$124 


be  seen,  is  much  more  liberal  with  respect  of  conveyances  to 
the  firm  in  the  firm  name.28  The  Uniform  Partnership  Act 
permits  conveyances  both  by  and  to  the  firm  in  the  firm  name.23 
Unless  authorized  by  statute,  actions  cannot  be  maintained 
either  by  or  against  the  partnership  in  the  firm  name,  but  must 
be  brought  in  the  individual  names  of  the  partners.84 

§  124.  Of  the  firm  name  as  property. — ' '  The  name  by  which 
a  firm  is  known,"  says  Mr.  Justice  Lindley,25  "is  not  of  itself 
the  property  of  the  firm,  and,  speaking  generally,  there  is  noth- 
ing at  common  law  to  prevent  persons  from  carrying  on  business 
in  partnership  under  any  name  they  please."  Notwithstanding 
this,  however,  it  is  clear  that  the  firm  name  is  a  thing  of  value, 
which  may  be  made  the  subject  of  sale  or  assignment.  It  is  also 
a  thing  which  the  law  will  protect.  Thus  Mr.  Justice  Lindley 
continues:  ''One  firm  is  not  at  liberty  to  mislead  the  public 
by  using  a  name  similar  to  the  name  of  another  firm  so  as  to 
pass  off  themselves  or  their  goods  for  that  other  or  for  the  goods 


state  of  Minnesota,"  is  legally  suffi- 
cient as  a  mortgage  to  S.  W.  Farn- 
ham  and  J.  A.  Love  joy,  shown  to 
have  been  the  members  of  a  firm  en- 
gaged in  business  in  that  county 
under  that  name.  Menage  v.  Burke 
(1890),  43  Minn.  211,  45  N.  W.  155, 
19  Am.  St.  R.  235.  See,  also,  Town- 
shend  v.  Goodfellow  (1889),  40 
Minn.  312,  41  N.  W.  1056,  3  L.  B. 
A.  739,  12  Am.  St.  B.  736;  Kelley  v. 
Bourne  (1887),  15  Ore.  476,  16  Pac. 
40.  To  same  effect  in  ease  of  deed: 
Sherry  v.  Gilmore  (1883),  58  Wis. 
324,  17  N.  W.  252;  Cole  v.  Mette 
(1898),  65  Ark.  503,  47  S.  W.  407, 
67  Am.  St.  E.  945,  Mechem's  Gas. 
801.  Many  other  cases  will  be  found 
cited,  post,  §  153. 

22  See  post,  §  155. 

23  See  sec.  10. 

24  Statutes  in  many  states  permit 
actions  in  the  firm  name  under  vari- 
ous circumstances:  sometimes  gener- 


ally; sometimes  where  the  partner- 
ship is  non-resident;  sometimes 
where  the  names  of  the  several  part- 
ners are  not  known.  See  Adams  Ex- 
press Co.  v.  State  (1903),  161  Ind. 
328,  67  N.  E.  1033 ;  Byers  v.  Schulpe 
(1894),  51  Ohio  St.  300,  38  N.  E. 
117,  25  L.  E.  A.  649;  Schweppe  v. 
Wellauer  (1890),  76  Wis.  19,  45  N. 
W.  17;  O'Brien  v.  Foglesong 
(1883),  3  Wyo.  57,  31  Pac.  1047. 

In  the  absence  of  such  a  statute, 
the  action  must  be  in  the  individual 
names  of  the  partners.  See  John- 
son v.  First  Nat.  Bank  (1906),  145 
Ala.  378,  40  So.  78 ;  Pollock  v.  Dun- 
ning (1876),  54  Ind.  115;  Smith  v. 
Canfield  (1860),  8  Mich.  493;  Heath 
v.  Morgan  (1895),  117  N.  Car.  504, 
23  S.  E.  489. 

25  Lindley  on  Partnership  (Ew- 
ell's  2d  Am.  ed.),  p.  114,  7th  ed.,  p. 
132. 


109 


§  125]  LAW  OF  PARTNERSHIP 

of  that  other.  Moreover,  an  established  firm  can  prevent  a 
company  (corporation)  from  registering  under  the  name  of 
the  firm." 

But  the  rule  that  one  firm  may  not  adopt  the  same  name  as 
another  firm  is  subject  to  the  qualification  that  a  person  or  a 
number  of  persons,  who  have  not  limited  their  right  by  con- 
tract, cannot  be  prevented  from  using  his  or  their  own  name, 
even  though  it  be  that  of  a  former  firm  in  the  same  business, 
and  even  though  its  use  may  cause  some  incidental  inconvenience 
or  damage  to  the  former  firm,26  provided  it  is  done  in  good 
faith  and  with  no  attempt  to  mislead  the  public  as  to  the  iden- 
tity.27 On  the  other  hand,  it  is  equally  well  settled  that  one 
will  not  be  permitted,  merely  under  the  pretext  of  using  his 
own  name,  to  practically  and  purposely  appropriate  the  busi- 
ness or  good-will  of  another.28  Ordinary  family  names  may  not 
be  exclusively  appropriated  as  trade  marks.29 

§  125.  Of  the  right  to  the  firm  name  upon  dissolution. — The 

firm  name,  as  has  been  seen,  may  be  one  of  two  kinds, — it  may 
be  a  purely  impersonal  or  fictitious  name,  like  "The  Chicago 
Hardware  Co.,"  or  it  may  be  a  personal  one,  made  up  in  whole 
or  in  part  of  the  individual  names  of  the  partners,  like  ' '  Smith 
&  Jones"  or  "John  W.  Smith  &  Co.,"  and  some  difference  in 
legal  consequences  follows  the  distinction: 

26  See      Williams      v.      Farrand  103  Tenn.  40,  52  S.  W.  880;  Stuart 
(1891),  88  Mich.  473,  50  N.  W.  446,  v.  Stewart  Co.   (1899),  33  C.  C.  A. 
14  L.  B.  A.  161,  Mechem's  Gas.  222,  480,   91   Fed.   243;    Higgins   Co.   v. 
Burd.    Gas.    588,    Gilm.    Cas.    177;  Higgins  Soap  Co.  (1895),  144  N.  Y. 
Eussia    Cement    Co.    v.     Le     Page  462,  39  N.  E.  490,  43  Am.   St.  B. 
(1888),  147  Mass.  206,  17  N.  E.  304,  769,  27  L.   E.  A.   42;    Lamb  Knit- 
9  Am.  St.  B.  685;   Meneely  v.  Me-  Goods  Co.  v.  Lamb  Glove  &  Mitten 
neely  (1875),  62  N.  Y.  427,  20  Am.  Co.  (1899),  120  Mich.  159,  78  N.  W. 
E.  489;  Eogers  v.  Eogers  (1885),  53  1072,  44  L.  E.  A.  841;  Pillsbury  v. 
Conn.    121,    55    Am.    E.    78;    Howe  Pillsbury-Washburn  Co.    (1894),  12 
Scale    Co.    v.    Wyckoff,    Seamans    &  C.  C.  A.  432,  64  Fed.  841;    Singer 
Benedict  (1904),  198  U.  S.  118,  25  Mfg.  Co.  v.  June  Mfg.  Co.   (1895), 
8.  Ct.  609,  49  L.  ed.  972.  163  U.  S.  169,  16  S.  Ct.  1002,  41  L. 

27  Where    such    an    attempt    ap-  ed.  118. 

pears,  the  use  may  be  enjoined.  Bin-  29  See  Howe  Scale  Co.  v.  Wyckoff, 

inger  v.  Clark  (1870),  60  Barb.  (N.  Seamans  &  Benedict  (1904),  198  U. 

Y.)  113.  S.  118,  25  S.  Ct.  609,  49  L-  ed.  972. 

28  See  Eobinson  v.  Storm  (1899), 

110 


SOME   INCIDENTS  OF  PARTNERSHIP  [§  126 

1.  Upon  the  dissolution  of  the  partnership  by  act  of  parties 
or  by  mere  lapse  of  time,  neither  partner  buying  out  the  other, 
either  would  have  the  right  to  go  into  business  for  himself  and 
either  one  might  usually  adopt  the  old  firm  name  if  it  were  an 
impersonal  one  which  could  be  used  without  leading  the  public 
to  believe  that  the  old  firm  still  continued;  but  neither  would 
have  the  right  to  use  the  old  firm  name  including  the  individual 
name  of  any  partner  who  did  not  continue  with  him  where  to 
do  so  would  involve  the  latter  in  liability.30  Neither  would  he 
have  the  right,  where  his  former  partner  also  continued  in  busi- 
ness, to  announce  himself  as  the  "successor  to"  the  old  firm, 
though  either  might  designate  himself  as  "formerly  of"  the 
old  firm;  but  he  must  do  nothing  to  deceive  the  public,  such  as 
putting  his  own  name  and  the  "formerly  of"  in  very  small 
letters,  and  the  old  firm  name  in  very  large  letters.31  The  Uni- 
form Partnership  Act  has  a  provision  which  will  be  found  in 
the  notes.32 

§  126.  2.  Upon  the  termination  of  a  partnership  by 

death,  it  has  been  held  that  the  survivor  has  the  right  to  con- 
tinue the  use  of  the  old  name,  whether  personal  or  impersonal;  33 
but  the  true  rule  seems  to  be  that  the  name,  if  impersonal  and 

30  Apparently  in  such  a  ease  not  543;  Peterson  v.  Humphrey  (1857), 
only    may    either    one    use    the    old  4  Abb.  Pr.   (N.  Y.)   394;   Holbrook 
name  if  he  is  the  only  one  who  con-  v.  Nesbitt  (1895),  163  Mass.  120,  39 
tinues  business;    but,  if  more  than  N.  E.  794. 

one  of  the  former  partners  continue          32  Sec.  38,    (2)    (b)    "When   dis- 

business,  each  may  use  it.     Neither  solution  is  caused  in  contravention 

one  has  the  exclusive  right  to  appro-  of       the       partnership       agreement 

priate  that  which  belongs  to  one  as  *     *     *     the  partners  who  have  not 

much  as  to  the  other.     See  Burchell  caused  the  dissolution  wrongfully,  if 

v.  Wilde  [1900],  1  Ch.  551;   Town-  they  desire  to  continue  in  the  same 

send  v.  Jarman   [1900],  2  Ch.  698;  name,  either  by  themselves  alone  or 

Dyer  v.  Shove  (1897),  20  E.  I.  259,  jointly  with  others,  may  do  so  dur- 

38  Atl.  498,  Burd.  Gas.  605.  ing  the  agreed  term  for  the  partner- 

31  See       Hookham      v.       Pottage  ship, ' '  upon   giving  a  bond   of  in- 
(1872),  L.  B.  8  Ch.  App.  91;  Smith  demnity,  etc. 

v.  Cooper  (1877),  5  Abb.  New  Gas.          33  See  .Lewis  v.  Langdon   (1835), 
(N.   Y.)    274;    Morgan   v.   Schuyler       7  Simons   (Bug.  Gh.)  421. 
(1880),  79  N.  Y.  490,  35  Am.  Rep. 

Ill 


§126] 


LAW  OP  PARTNERSHIP 


of  value,  is  a  partnership  asset,  and  must  be  dealt  with  as  such,34 
subject,  of  course,  to  the  right  of  the  surviving  partner  to  start 
a  new  business  in  his  own  name. 

3.  If  one  partner  buys  out  the  other  for  the  purpose  of  con- 
tinuing the  business,  but  nothing  is  expressly  agreed  upon  in 
reference  to  the  name,  the  sale  by  one  of  all  his  interest  in  the 
business,  and  a  fortiori  if  the  good-will  be  expressly  included, 
gives  to  the  continuing  partner  the  exclusive  right  to  continue 
the  use  of  the  old  firm  name  if  it  be  a  fictitious  one,  but  not  if 
it  be  a  purely  personal  one  containing  the  name  of  the  retiring 
partner,  except  to  the  extent  that  the  personal  name  has  been 
made  a  trade  name  or  a  trade-mark  of  the  business.35  The  re- 
tiring partner  in  such  a  case  may  go  into  business  in  his  own 
name,  but  he  must  not  use  even  his  own  name  in  such  a  manner 
as  to  mislead  the  public  into  believing  that  he  is  the  old  firm.36 


34  See  Fenn  v.  Bolles  (1858),  7 
Abb.  Pr.  (N.  Y.)  202. 

Under  a  statute  providing  for  the 
recording  of  firm  names  and  dis- 
closing who  are  the  partners  under 
a  given  name,  a  surviving  partner 
runs  no  risk  of  liability  where  a  pur- 
chaser of  the  old  firm  name  con- 
tinues the  business  in  that  name, 
even  though  it  includes  the  name  of 
the  surviving  partner.  Slater  v. 
Slater  (1903),  175  N.  Y.  143,  67  N. 
E.  224,  96  Am.  St.  E.  605,  61  L.  E. 
A.  796,  Mechem's  Gas.  857.  Other- 
wise that  risk  might  make  improper 
a  sale  of  a  personal  firm  name  whose 
use  might  involve  him.  The  heirs  or 
the  estate  of  the  deceased  partner  on 
the  other  hand,  cannot  ordinarily  be 
made  liable  merely  by  the  continu- 
ance of  the  business  in  the  old  name, 
even  though  it  includes  the  name  of 
the  deceased  partner.  The  construc- 
tive notice  of  the  death  prevents 
that.  See  Webster  v.  Webster 
(1791),  3  Swanst.  492,  36  Eng.  Ee- 
print  949;  Price  v.  Mathews  (1859), 


14  La.  Ann.  11;  Maryland  Nat. 
Bank  v.  Hollingsworth  (1904),  135 
N.  Car.  556,  47  S.  E.  618;  Uniform 
Partnership  Act,  Sec.  41,  subd.  10. 

35  See    Thynne   v.    Shove    (1890), 
45   Ch.   Div.   577;    Levy  v.  Walker 
(1879),  10  Ch.  Div.  436. 

36  See       Williams       v.      Farrand 
(1891),  88  Mich.  473,  50  N.  W.  446, 
14  L.  E.  A.  161,  Mechem's  Gas.  222, 
Burd.  Gas.  588,  Gilm.  Gas.  177;  Von- 
derbank  v.  Schmidt    (1892),  44  La. 
Ann.  264,  10  So.  616,  32  Am.  St.  E. 
836,    15   L.    E.    A.    462    and    note; 
Brass  and  Iron  Works  Co.  v.  Payne 
(1893),  50  Ohio  St.  115,  33  N.  E. 
88,  19  L.  E.  A.  82;  Myers  v.  Kala- 
mazoo  Buggy  Co.   (1884),  54  Mich. 
215,  19  N.  W.  961,  20  id.  545,  52 
Am.  Eep.  811;   Snyder  Manufactur- 
ing Co.  v.  Snyder   (1896),  54  Ohio 
SI.  86,  43  N.  E.  325,  Mechem  's  Gas. 
240;  Eowell  v.  Eowell   (1904),  122 
Wis.  1,  99  N.  W.  473.    As  to  the  use 
of  individual  names  as  trademarks, 
see  Fish  Bros.   Wagon   Co.  v.  Fish 
(1892),  82  Wis.  546,  52  N.  W.  545, 


112 


SOME  INCIDENTS  OP  PARTNERSHIP  [§  127 

4.  The  retiring  partner  may,  however,  by  express  agreement 
invest  the  continuing  partner  with  the  right  to  continue  the 
former  firm  name,  even  though  it  is  a  purely  personal  one; 
and  the  retiring  partner  may,  in  the  same  manner,  limit  his  own 
right  to  resume  business  or  to  use  or  permit  to  be  used  his  own 
name  in  connection  with  a  new  business  to  compete  with  the 
old.87 

5.  Where  the  firm  business  and  good-will  are  sold  to  a  third 
person, — whether  voluntarily  or  as  the  result  of  some  legal  pro- 
ceeding— ,  the  purchaser  will,  in  the  case   of  manufacturing 
and  trading  partnerships  at  least,  acquire  the  right  to  such  use 
of  impersonal  firm  names  as  can  be  made  without  involving  the 
former  partners  in  personal  liability  for  the  debts  of  the  new 
business.88    There  is  less  risk  of  such  a  liability  where  the  sale 
is  made  on  legal  process  involving  publicity  of  the  fact  than 
where  it  is  the  result  of  private  negotiation.    The  effect  of  the 
sale  of  the  good- will  upon  the  right  to  use  the  name  is  considered 
more  fully  in  a  later  section.89 

III.  OP  THE  GOOD-WILL. 

§  127.  What  is  meant  by  the  good-will. — What  is  known  as 
-the  " good- will"  of  the  business  may  properly  be  considered 

33  Am.  St.  B.  72,  16  L.  E.  A.  453;  37  See  Grow  v.  Seligman   (1882), 

Marshall    v.    Pinkham     (1881),    52  47    Mich.    607,    41    Am.    Rep.    737; 

Wis.  585,  9  N.  W.  615,  38  Am.  Eep.  Frazer    v.    Frazer    Lubricator    Co. 

756;  Eussia  Cement  Co.  v.  Le  Page  (1887),  121  111.  147,  13  N.  E.  639, 

(1888),    147    Mass.    206,    17   N.   E.  2  Am.  St.  E.  73;  Symonds  v.  Jones 

304,  9  Am.  St.  E.   685;    Shaver  v.  (1890),  82  Me.  302,  19  Atl.  820,  17 

Shave*  (1880),  54  Iowa  208,  37  Am.  Am.  St.  E.  485,  8  L.  E.  A.  570;  Le 

Eep.  194,  6  N.  W.  188.  Page    Co.    v.    Eussia    Cement    Co. 

"The   defendant  is  not  deprived  (1892),   51  Fed.  941,  17  L.  E.  A. 

of  the  right  to  use  his  own  name  in  354,  5  U.  8.  App.  112. 

connection  with  conduct  of  his  busi-  38  See  Snyder  Mfg.  Co.  v.  Snyder 

ness  simply  from  the  fact  that  his  (1896),   54  Ohio   St.   86,  43  N.  E. 

surname  is  a  portion  of  the  trade-  325,  31  L.  E.  A.  657,  Mechem's  Gas. 

mark  used  by  the  copartnership  of  240 ;  Twin  City  Brief  Printing  Co.  v. 

which  he  was  formerly  a  member,  Eeview- Pub.  Co.  (1918),  139  Minn, 

aiid    whose   business   has   been   con-  358,  166  N.  W.  413,  L.  E.  A.  1918  D, 

tinued    by    plaintiff."      White     v.  154. 

Trowbridge   (1906),  216  Pa.  11,  64  39  See  post,  §130. 
Atl.  862. 

Mech.  Part.— 8  113 


§  127]  LAW   OF   PARTNERSHIP 

in  connection  with  the  name.  The  good-will  is  regarded  as  a 
valuable  incident  of  the  business,  and  may  be  sold  or  trans- 
ferred as  such.  Precisely  what  it  is  the  courts  have  found  it 
difficult  to  define.  ' '  The  term  good- will, ' '  says  Mr.  Justice  Lind- 
ley,40  "can  hardly  be  said  to  have  any  precise  signification.  It 
is  generally  used  to  denote  the  benefit  arising  from  connection 
and  reputation ;  and  its  value  is  what  can  be  got  for  the  chance 
of  being  able  to  keep  that  connection  and  improve  it."  Mr. 
Justice  Story41  describes  it  as  the  benefit  or  advantage  "which 
is  acquired  by  an  establishment  beyond  the  mere  value  of  the 
capital,  stock,  funds  or  property  employed  therein,  in  conse- 
quence of  the  general  public  patronage  and  encouragement  which 
it  receives  from  constant  or  habitual  customers  on  account  of 
its  local  position,  or  common  celebrity,  or  reputation  for  skill 
or  affluence,  or  punctuality,  or  from  other  accidental  circum- 
stances or  necessities,  or  even  from  ancient  partialities  or  prej- 
udices. ' '  Lord  Eldon  **  declared  that  ' '  the  good-will  of  a  trade 
is  nothing  more  than  the  probability  that  the  old  customers 
will  resort  to  the  old  place ; ' '  and  this  is  approved  by  Mr.  Par- 
sons,43 who  says:  "It  is  a  hope  or  expectation,  which  may  be 
reasonable  and  strong,  and  may  rest  upon  a  state  of  things 
that  has  grown  up  through  a  long  period  and  been  promoted  by 
large  expenditures  of  money.  And  it  may  be  worth  all  the 
money  it  has  cost,  and  a  great  deal  more;  but  it  is,  after  all, 
nothing  more  than  a  hope,  grounded  upon  a  probability. ' ' 

The  term  ' '  good-will, ' '  however,  as  is  pointed  out  in  a  case  44 
in  Nebraska,  is  often  used  in  three  different  senses:     1.  That 

401  Lindley  on  Partnership  (Ew-  733;   Cowan  v.  Fairbrother   (1896), 

ell's  2d  Am.  ed.),  439.  118  N.  Car.  406,  24  S.  E.  212,  54 

41  Story  on  Partnership,  §99.  Am.  St.  B.  733,  32  L.  E.  A.  829; 

42  In  Cruttwell  v.  Lye  (1810),  17  Bloom   v.    Ins.    Agency    (1909),    91 
Ves.    335,   346.     Many   later   cases,  Ark.  367,  121  S.  W.  293;   Maxwell 
however,    regard    this    definition    as  v.  Sherman  (1911),  172  Ala.  626,  55 
too    narrow.      See    Trego    v.    Hunt  So.  520. 

[1896],  App.  Gas.  7,  Mechem's  Gas.  43  Parsons    on    Partnership     (4th 

247,  Burd.  Gas.  602.  ed.),  §  181. 

See,   also,   Macfadden   v.    Jenkins  44  Lobeek  v.  Hardware  Co.  (1893), 

(1918),  —  N.  Dak.  — ,  169  N.  W.  37  Neb.  158,  55  N.  W.  650,  23  L.  E. 

151;   French  v.  Parker   (1888),   16  A.  795. 
B.  I.  219,  14  Atl.  870,  27  Am.  St.  E. 

114 


SOME  INCIDENTS  OP  PARTNERSHIP 


[§128 


above  indicated;  2.  Where  it  is  connected  with  or  includes  a 
trade-mark  or  trade-name ;  *6  and  3.  Where  it  is  coupled  with 
an  express  agreement  not  to  compete  with  the  business  with 
which  it  is  connected.  The  first  is  the  true  use,  and  it  is  in 
that  sense  that  the  term  is  here  used. 

The  real  and  substantial  essence  of  good-will — the  thing  which 
leads  people  to  buy  it  and  pay  money  for  it — is  the  hope  or 
expectation  that  the  buyer  will  thereby  acquire  an  established 
business  or  source  of  business  instead  of  being  compelled  to  de- 
vote time  and  money  to  developing  a  business  de  novo. 

§  128.  Good-will  as  an  asset. — The  good-will  is  a  partnership 
asset.  As  a  rule,  it  inheres  in  the  business  and  not  in  the  locality, 
though  in  the  case  of  hotels,  theaters  and  similar  places  the  rule 
may  be  otherwise.*6  It  does  not  attach  to  the  stock  in  trade, 
and  does  not  necessarily  pass  with  a  sale  of  the  stock.  It  does 
pass,  however,  with  a  sale  of  the  business,  or  of  all  interest  in  or 
assets  of  the  business.47 


45  As  an  illustration  of  this  form, 
the    court    cited    Smith    v.    Walker 
(1885),  57  Mich.  456,  22  N.  W.  267, 
24  id.  830,  26  id.  783.    See,  also,  as 
to  the  effect  of  the  sale  of  business 
and  good-will  where  the  firm  name 
has  been  made  a  trade-mark,  Horton 
Mfg.  Co.  v.  Horton  Mfg.  Co.  (1883), 
18   Fed.   816;    Snyder   Mfg.    Co.   v. 
Snyder   (1896),  54  Ohio  St.  86,  43 
N.   E.  325,   31   L.  E.   A.   657,   Me- 
chem's  Gas.  240.    In  the  former  case 
the  court  said:     "If  one  has  made 
of  his  own  name  a  trade-mark,  and 
then  transfers  to  another  his  busi- 
ness, in  which  his  name  has  been  so 
used,  the  right  to  continue  such  use 
of  the  name  will  doubtless  follow  the 
business  as  often  as  it  may  be  trans- 
ferred. ' ' 

46  See  as  to  good  will  relating  to 
hotels,  theaters,  stores,  etc.:      Chit- 
tenden  v.  Witbeck  (1883),  50  Mich. 
401,  15  N.  W.  526 ;  Booth  v.  Jarrett 


(1876),  52  How.  Pr.  (N.  Y.)  169; 
Woodward  v.  Lazar  (1863),  21  Cal. 
448,  82  Am.  Dec.  75;  Armstrong  v. 
Kleinhaus  (1884),  82  Ky.  303,  56 
Am.  Rep.  894;  Vonderbank  v. 
Schmidt  (1892),  44  La.  Ann.  264, 
10  So.  616,  32  Am.  St.  E.  336,  15  L. 
E.  A.  462.  Dental  office:  Slack  v. 
Suddoth  (1899),  102  Tenn.  375,  52 
S.  W.  180,  73  Am.  St.  E.  881,  45  L. 
E.  A.  589;  Morgan  v.  Schuyler 
(1880),  79  N.  Y.  491,  35  Am.  Eep. 
543.  Newspaper:  Metropolitan 
Bank  v.  St.  Louis  Dispatch  Co. 
(1892),  149  TJ.  S.  436,  13  S.  Ct.  944, 
37  L.  ed.  799. 

47Hoxie  v.  Chaney  (1887),  143 
Mass.  592,  10  N.  E.  713,  58  Am.  Eep. 
149;  Merry  v.  Hoopes  (1888),  111 
N.  Y.  415,  18  N.  E.  714;  Williams 
v.  Farrand  (1891),  88  Mich.  473,  50 
N.  W.  446,  14  L.  E.  A.  16L  Me- 
chem  's  Gas.  222,  Burd.  Gas.  588. 


115 


i§  129, 130] 


LAW   OF   PARTNERSHIP 


§  129.  Disposition  of  good-will  on  dissolution. — Upon  the  dis- 
solution of  the  partnership,  the  good-will  of  a  manufacturing 
or  trading  partnership  at  least,48  is  a  firm  asset  and  must  be 
sold  for  the  benefit  of  the  partners,  if  either  partner  desires 
such  sale.48  If  no  effort  is  made  to  bring  about  such  a  sale, 
the  good-will  as  a  firm  asset  will  usually  lapse.  Either  partner 
may  start  in  business  again  (in  the  absence  of  any  agreement 
to  the  contrary),  and  get  such  incidental  benefit  from  his  former 
connection  with  the  partnership  business  as  ke  is  able.60  Upon 
a  termination  by  death,  the  good-will  does  not  go  to  the  survivor 
alone,  but  is  still  a  firm  asset  which  he  must  deal  with  like  other 
assets,61  and  for  whose  value  he  must  account  if  he  appropriates 
it  to  himself.52 

§  130.  Effect  of  sale— Right  to  use  firm  name.— The  sale  of 
the  good-will  by  one  partner  to  another  does  not,  of  itself,  carry 


48  See  Read  v.  Mackay  (1905),  47 
N.  Y.  Misc.  435;  Masters  v.  Brooks 
(1909),  132  N.  Y.  App.  Div.  874, 
117  N.  Y.  Supp.  585.     In  Slack  v. 
Suddothr  supra,  it  is  said  that  there 
can  be  no  forced  sale  of  such  good 
will  as  is  "based  upon  professional 
reputation    and    standing    such    as 
arises  from  the  skill  of  physicians, 
dentists,    attorneys,    etc.,    whatever 
may  be  done  as  to  such  good  will  as 
arises  out  of  location." 

See,  also,  Macfadden  v.  Jenkins 
(1918),  —  N.  Dak.  — ,  169  N.  W. 
151. 

49  See  Sheppard  v.  Boggs  (1879), 
9    Neb.    257;    Snyder    Mfg.    Co.    v. 
Snyder   (1896),  54  Ohio  St.  86,  43 
N.  E.   325,   31  L.   E.  A.   657,  Me- 
chem  'a  Gas.  240. 

50 See  Eice  v.  Angell  (1889),  73 
Tex  350,  11  S.  W.  338;  Slack  v. 
Suddoth,  supra. 

51  See  Hutchinson  v.  Nay  (1903), 
183  Mass.  355,  67  N.  E.  601,  Me- 
chem's  Gas.  838;  Hutchinson  v.  Nay 


(1905),  187  Mass.  262,  72  N.  E.  974, 
68  L.  E.  A.  186,  105  Am.  St.  R.  390, 
Mechem  's  Gas.  842 ;  Tennant  v.  Dun- 
lop  (1899),  97  Va.  234,  33  S.  E. 
620.  Compare  Didlake  v.  Grocery 
Co.  (1909),  160  Ala.  484,  49  So. 
384,  22  L.  E.  A.  (N.  S.)  907;  Mus- 
selman's  Appeal  (1869),  62  Pa.  St. 
81,  1  Am.  Rep.  382;  Dyer  v.  Shove 
(1897),  20  R,  I.  259,  38  Atl.  498, 
Burd.  Gas.  605. 

52  See  Smith  v.  Everett  (1859), 
27  Beav.  (Eng.  Ch.)  446;  Hill  v. 
Fearis  [1905],  1  Ch.  466;  Rammels- 
berg  v.  Mitchell  (1876),  29  Ohio  St. 
22;  Rowell  v.  Rowell  (1904),  122 
Wis.  1,  99  N.  W.  473;  Hutchins  v. 
Page  (1910),  204  Mass.  284,  90  N. 
E.  565,  134  Am.  St.  R.  656 ;  Frear  v. 
Lewis  (1915),  166  N.  Y.  App.  Div. 
210,  151  N.  Y.  S.  486;  Costa  v. 
Costa  (1915),  222  Mass.  280,  110  N. 
E.  309;  Moore  v.  Rawson  (1905), 
185  Mass.  264,  70  N.  E.  64,  Me- 
chem 's  Gas.  1089;  s.  c.,  199  Mass. 
493,  85  N.  E.  586. 


116 


SOME  INCIDENTS  OP  PARTNERSHIP 


[§130 


the  right  to  the  firm  name,  if  it  be  a  personal  one  including 
the  name  of  the  retiring  partner  in  such  a  form  that  its  con- 
tinued use  would  subject  him  to  liability  for  the  debts  of  the 
new  business.  Unless  more  was  stipulated  for,  his  name  could 
only  be  used  to  the  extent  that  it  had  become  or  been  made  a 
trade-name  or  trade-mark.68  The  buyer's  right  to  use  imper- 
sonal names  would  usually  be  conceded.  The  same  consequences 
would  also  ordinarily  follow  where  the  sale  was  by  the  firm 
or  its  representative  to  a  third  person,64  that  is  to  say,  impersonal 
names,  in  the  case  of  manufacturing  and  trading  partnerships 
at  least,  and  trade-names  would  pass,  but  not  personal  ones  or 
those  based  upon  personal  qualities  or  attributes,  such  as  those  of 
professional  or,  it  is  said,  private  banking  partnerships.66 


53  See      Knoedler      v.      Glaenzer 
(1893),  55  Fed.  895,  5  C.  C.  A.  305, 
14  U.  S.  App.  336,  20  L.  R.  A.  733 ; 
Vonderbank  v.   Schmidt   (1892),  44 
La.  Ann.  264,  10  So.  616,  32  Am.  St. 
R.  336,  15  L.  R.  A.  462;  Williams  v. 
Farrand    (1891),  88  Mich.   473,  50 
N.  W.  446,  14  L.  R.  A.   161,  Me- 
chem's    Gas.    222,    Burd.    Gas.    588, 
Gilm.  Gas.  177. 

54  See  ante,  §  125. 

55  In  Read  v.  Maekay  (1905),  47 
N.   Y.   Misc.   435,   95  N.   Y.    Supp. 
935,  it  is  said:     "From  what  has 
been  said  it  follows  that  while  a  firm 
name  may  in  some  cases  be  deemed 
a  part  of  the  good  will  of  business, 
it  is  not  of  itself,  and  necessarily,  a 
part    of    the    good    will,    and    that, 
while  in  trade   it  may  under   some 
circumstances  be  such,  it  can  not  be- 
come a  part  of  the  good  will  in  cases 
of  business  which  depend  upon  the 
personal  attributes  of  the  partners 
engaged    therein,    such    as    profes- 
sional partnerships.     In  such   cases 
it  has  been  ruled  that  the  good  will 
of  business  does  not  include  the  firm 
name  (Morgan  v.  Schuyler,  79  N.  Y. 


490,  35  Am.  Rep.  543),  and  that  the 
court  will  not  order  a  compulsory 
sale.  Slack  v.  Suddoth,  102  Tenn. 
375,  52  S.  W.  180,  45  L.  R.  A.  589, 
73  Am.  St.  R.  881.  It  is  quite  clear, 
therefore,  that  the  firm  name,  while 
in  every  case  a  valuable  adjunct  to 
the  good  will,  is  not  necessarily  a 
part  of  the  good  will,  simply  by  rea- 
son of  the  fact  that  it  is  an  estab- 
lished firm  name,  and  in  my  opinion 
there  is  no  basis  for  a  distinction 
between  a  partnership  name  of  a 
banking  business  and  a  professional 
partnership  for  the  purposes  of  the 
present  question.  Each  is  equally 
distinguishable  from  a  manufactur- 
ing or  trading  partnership,  so  far  as 
the  inclusion  or  exclusion  of  the  firm 
name  in  or  from  the  good  will  is 
made  to  depend  upon  the  personal 
qualities  of  the  members  of  the  firm. 
The  banker,  as  such,  while,  of  course, 
essential  to  trade  and  a  means  of  it, 
is  not  a  trader  or  tradesman." 

See,  also,  Masters  v.  Brooks 
(1909),  132  N.  Y.  App.  Div.  874, 
117  N.  Y.  Supp.  585. 


117 


§  131]  LAW  OP  PARTNERSHIP 

§131.  Limitations  resulting  from  sale  of  good- will  upon 
right  to  carry  on  competing  business. — What  limitations,  if 
any,  a  mere  sale  of  the  good-will,  without  any  restrictive  cove- 
nants, will  impose  upon  the  seller  with  reference  to  his  right 
to  subsequently  carry  on  a  competing,  business,  is  a  matter  not 
everywhere  agreed  upon.  The  rule  might  conceivably  be  that 
no  limitation  would  be  implied;  or  that  there  should  be  a  com- 
plete disability;  or,  adopting  a  middle  view,  that  it  might  be 
done  under  some  circumstances  or  by  certain  methods  but  not 
otherwise.  A  distinction  may  also  be  made  depending  upon 
whether  the  sale  of  the  good-will  is  voluntary  or  forced.  The 
English  courts  have  drawn  the  line  in  the  case  of  a  voluntary  sale 
at  personal  solicitation  of  former  customers.  The  voluntary'  seller 
of  the  good-will  may  embark  in  a  similar  business,  in  the  same 
town — next  door,  if  he  will — :  he  may  advertise  publicly  as  any 
one  else  might  do  who  was  starting  a  new  business,  but  he  may 
not  endeavor  to  get  back  the  trade  of  the  old  customers — which 
is  what  he  has  sold — by  taking  advantage  of  his  knowledge  of 
who  they  are  to  personally  and  privately  solicit  them  to  con- 
tinue to  deal  with  him.56  If  they  come  to  him  as  the  result  of 
the  same  sort  of  public  advertising  which  a  new  dealer  would 
resort  to,  he  is  not  obliged  to  refuse  to  deal  with  them.  Any 
other  new  dealer  might  properly  have  reached  them  in  the  same 
way.  This  seems  to  be  the  rule  sustained  by  the  weight  of  au- 
thority.57 The  Massachusetts  court,  on  the  other  hand,  has  held 
that  one  who  has  made  a  voluntary  sale  of  the  good-will  may 
not  start  the  new  business  at  such  a  time  or  place  as  will  sub- 
stantially result  in  his  encroachment  upon  the  business  he  has 
sold.  He  may  not  derogate  from  his  own  grant.68  Some  other 

56  See     Trego     v.     Hunt     [1896],  A.   (N.  S.)  293;  Wentzel  v.  Barbin 
App.    Gas.    7,    Mechem's    Gas.    247,  (1899),   189   Pa.   502,  42    Atl.   44; 
Burd.  Gas.  602.  Zanturjian  v.  Boornazian  (1903),  25 

57  See  Eanft  v.   Keimers    (1902),  E.  I.  151,  55  Atl.  199.    Contra:  Cot- 
200  111.  386,  65  N.  E.  720,  60  L.  E.  trell  v.  Babcoek  Printing  Press  Co. 
A.  291,  Mechem's  Gas.  852;  Williams  (1886),  54  Conn.  122,  6  Atl.  791. 
v.  Farrand  (1891),  88  Mich.  473,  50  58  See  Angier  v.  Webber   (1867), 
N.   W.  446,  14  L.  E.  A.  161,  Me-  14  Allen   (96   Mass.)    211,  92  Am. 
chem's    Gas.    222,   Burd.    Gas.   588;  Dec.     748;     Dwight     v.     Hamilton 
Von  Bremen  v.  MacMonnies  (1910),  (1873),   113  Mass.   175;   Munsey  v. 
200  N.  Y.  41,  93  N.  E.  186,  32  L.  E.  Butterfield   (1882),  133  Mass.  492; 

118 


SOME   INCIDENTS  OF  PARTNERSHIP  [§§132,133 

courts  have  taken  the  same  view;  and  some  have  made  distinc- 
tions in  this  respect  between  professional,  and  mercantile  or 
trading,  partnerships.69 

§  132.  Where  the  sale  of  good-will  is  not  a  voluntary 

one  but  is  forced  by  legal  process  or  the  necessity  of  winding 
up,  as,  for  example,  a  sale  by  an  assignee  in  bankruptcy,  a  re- 
ceiver, a  surviving  partner,  or  the  partners  themselves  at  the 
ordinary  termination  of  the  partnership,  a  different  rule  ap- 
plies. England  permits  personal  solicitation  where  the  sale  was 
forced,60  and  the  Massachusetts  rule  permits  him  to  start  a 
new  business  though  it  may  incidentally  encroach  upon  the  busi- 
ness sold.61 

IV.  OP  THE  CAPITAL  OF  THE  FIRM. 

§133.  What  constitutes  capital. — The  capital  of  the  firm, 
strictly  speaking,  is  the  aggregate  of  the  sums  which  the  part- 
ners have  agreed  to  contribute  for  the  transaction  of  the  part- 
nership business.  It  differs  from  the  property  of  the  firm,  inas- 
much as  the  capital  is  a  fixed  sum,  while  the  amount  of  prop- 
erty possessed  by  the  firm  may  vary  from  time  to  time,  and  be 
more  or  less  than  the  capital.  It  differs  also  from  advances 
made  by  the  partners  to  the  firm,  for  the  latter  are  ordinarily 
in  the  nature  of  loans  to  the  firm,  and  not  contributions  to  its 
fixed  capital.62 

In  a  loose  or  popular  sense,  the  term  capital  is  often  used 
to  indicate  the  aggregate  of  property  or  assets  which  the  firm 

Toss  v.  Eoby  (1907),  195  Mass.  292,  60 See  Walker  v.  Moitram  (1881), 

81  N.  E.  199,  10  L.  E.  A.   (N.  S.)  19    Ch.    Div.    355;    Trego    v.    Hunt, 

1200,  11  Ann.  Gas.  571;  Old  Corner  supra. 

Bookstore    v.    Upham     (1907),    194  61  See    Hutchinson    v.    Nay    (187 

Mass.  101,  80  N.  E.  228,  120  Am.  St.  Mass.  262),  supra;  Batchelder  &  Co. 

E.    532;    Gordon   v.    Knott    (1908),  v.  Batchelder  (1914),  220  Mass.  42, 

199  Mass.  173,  85  N.  E.  184,  19  L.  107  N.  E.  455;  Von  Bremen  v.  Mac- 

E.  A.  (N.  S.")  762.    Compare  Bassett  Monnies,  supra. 

v.    Percival    (1862),    5    Allen    (87  62 1  Lindley  on  Partnership  (Ew- 

Mass.)  345.  ell's  2d  ed.);  320. 

59  See  Brown  v.  Benzinger 
(1912),  118  Md.  29,  84  Atl.  79,  Ann. 
Cas.  1914  B,  582. 

119 


§§  134,  135]  LAW  OF  PARTNERSHIP 

may  have,  in  the  same  way  that  we  sometimes  speak  of  the 
capital  of  a  single  individual. 

Undivided  profits  which  are. allowed  to  accumulate  do  not 
thereby  become  capital,  though  they  are,  of  course,  part  of  the 
firm  assets.63  Some  agreement  on  the  part  of  the  persons  inter- 
ested to  capitalize  them,  would  be  necessary  in  order  to  have  that 
effect. 

§134.  Fixing  amount  and  interests. — In  the  final  distribu- 
tion of  assets  upon  the  winding  up  of  the  partnership  business, 
capital  is  usually  to  be  distributed  among  the  partners  in  pro- 
portion to  the  capital  contributed,  and  it  is  therefore  desirable 
to  have  the  amount  of  the  capital  and  the  shares  of  each  part- 
ner definitely  fixed,  though,  where  nothing  appears  to  the  con- 
trary, it  will  be  presumed  that  their  shares  are  equal. 

The  amount  of  the  capital  as  originally  determined  cannot 
subsequently  be  increased  or  diminished  without  the  consent  of 
all  of  the  partners.64 

§135.  Certificates  or  other  evidence  of  interest. — It  is  not 

the  common  practice,  in  ordinary  partnerships,  to  issue  certifi- 
cates of  " stock"  or  other  similar  evidence  of  a  partner's  in- 
terest; though  there  is  no  legal  objection  to  it  and  it  is  occa- 
sionally done.65  Such  interests  are,  of  course,  in  their  nature 
not  transferable  like  shares  of  stock  in  a  corporation.  In  the 
case  of  the  large  partnerships  with  transferable  shares,  usually 
called  joint-stock  companies,  such  certificates  of  ownership  are 
more  common. 

63  See  Dean  v.  Dean   (1882),  54  65  See  e.   g.   Harper  v.  Raymond 

Wis.  23,  11  N.  W.  239,  Gilm.  Gas.  (1858),  3  Bosw.   (16  N.  Y.  Super.) 

164.  29.  7  Abbott  Pr.  142. 

The   partnership   agreement  may,  In  Power  Grocery  Co.  v.  Hintoii 

of    course,    provide    that    undivided  (1920),  —  Ky.  — ,  218  S.  W.  1013, 

profits  shall,  or  may  at  the  option  of  certificates  of  stock  issued  by  a  cor- 

the    partner,    become    part    of    the  poration   to    which    the   partnership 

capital.       Molineaux     v.     Eaynolds  succeeded      were,      by      agreement, 

(1896),  54  N.  J.  Eq.  559,  35  Atl.  treated   and    transferred   as    certifi- 

536,  Gilm.  Gas.  215.  pates  of  interest  in  the  partnership. 

64Natusch  v.  Irving  (1824),  Gow 
on  Partn.  398. 

120 


SOME  INCIDENTS  OP  PARTNERSHIP  [§§  136,137 

§  136.  What  may  be  received  as  contributions  to  capital. — 

The  contributions  to  the  capital  need  not  be  in  money,  but  may 
be  made  in  real  or  personal  property,  labor,  skill,  or  whatever 
the  parties  may  agree  to  receive  as  such.  Neither  is  it  neces- 
sary that  each  partner  shall  contribute  the  same  kind  of  thing, 
for  one  may  contribute  money  and  another  property  and  an- 
other skill,  and  the  like.  The  use  only  of  property  may  also  be 
contributed,  the  partner  retaining  to  himself  as  an  individual 
the  title  to  it.66  It  is  not  necessary  that  the  several  contribu- 
tions shall  be  equal  in  amount  or  value ;  for  one  may  contribute 
much  while  another  contributes  little.67 

It  does  not  follow,  however,  where  one  contributes  money, 
and  the  other  skill,  experience  or  labor,  that  upon  a  termina- 
tion of  the  partnership  they  will  share  it  in  common;  for,  as 
will  be  seen,  upon  such  a  termination  each  partner  is  to  be  re- 
paid his  contributions  to  capital  before  the  profits  are  divided.68 

§  137.  Enforcing  contribution  of  capital. — The  firm  not  being 
generally  regarded  as  a  legal  entity,  separate  and  distinct  from 
the  partners,  no  action  at  law  can  be  maintained  by  the  firm 
to  compel  a  partner  to  pay  in  his  agreed  contribution  to  capital. 

66  See   Heran   v.    Hall    (1840),   1  by     making     further    contributions 
B.   Mon.    (Ky.)    159,    35   Am.   Dec.  without  calling  upon  his  copartner 
178;    Meadows  v.  Mocquot    (1901),  for  equal  ones  or  giving  him  an  op- 
110  Ky.  220,  61  S.  W.  28,  22  Ky.  L.  portunity  to  make  them,  to  swell  his 
R.  1646;  Nichols  v.  Murphy  (1891),  own  share  of  the  capital  and  profits 
136  111.  380,  26  N.  E.  509;   Humes  at  the  expense  of  his  copartner.  The 
v.  Higman  (1906),  145  Ala.  215,  40  court  will  permit  the  other  partner 
So.  128;  Gordon  v.  Gordon   (1882),  to  fill  up  his  capital  and  share  in 
49  Mich.  501,  13  N.  W.  834;  Davis  the    profits    accordingly.      Fulmer's 
v.  Davis  [1894],  1  Ch.  393;  Murphy  Appeal  (1879),  90  Pa.  St.  143. 

v.  Warren   (1885),  55  Neb.  215,  75  68  See    Shea  v.   Donahue    (1885), 

N.     W.     573;     Stumph     v.     Bauer  15  Lea    (Tenn.)    160,  54  Am.  Eep. 

(1881),  76  Ind.  157,  Gilm.  Gas.  175.  407,  Mechem's  Gas.  692,  Gilm.  Gas. 

67  Where     the     contract     contem-  168;  Whitcomb  v.  Converse  (1875), 
plates  equal  contributions  to  capital,  119  Mass.  38,  20  Am.  Rep.  311,  Me- 
to   be  made   in  instalments  as   the  chem's    Gas.    695,    Burd.    Gas.    575, 
business  may  require,  and  one  part-  Gilm.  488;  Hayes  v.  Hayes  (1889), 
ner  in  fact  has  chief  charge  of  the  66  N.  H.  134,  19  Atl.  571.    Compare 
business    which    proves   to    be    very  Meadows  v.  Mocquot,  supra. 
profitable,  he  will  not  be  permitted, 

121 


§§  138,  139]  LAW   OF   PARTNERSHIP 

Such  an  action  would  require  the  partner  in  question  to  be  at  the 
same  time  one  of  the  plaintiffs  as  well  as  the  defendant.69  Where, 
however,  one  person  agrees  with  another  to  become  a  partner 
and  contribute  a  certain  amount  of  capital,  and  then  refuses 
to  perform  the  contract,  the  other  may  maintain  an  action  at 
law  against  him  to  recover  damages  for  the  breach  of  the  agree- 
ment.70 

Payment  of  promised  contributions  to  capital  could,  indeed,  be 
enforced  for  the  benefit  of  creditors,  as  in  the  case  of  subscrip- 
tions to  the  capital  of  a  corporation,  but  since  normally  each 
partner  is  individually  liable  to  creditors  for  all  of  the  partner- 
ship debts,  there  would  ordinarily  be  no  reason  for  their  attempt 
to  enforce  a  more  limited  liability.  In  adjusting  the  relations  of 
the  partners  among  themselves,  however,  such  agreements  would 
be  important. 

V.  OF  THE  PROPERTY  OF  THE  FIRM. 
1.  Of  Firm  Property  in  General. 

§  138.  What  may  be  partnership  property. — The  property  of 
the  firm  may  be  that  originally  contributed  by  the  partners  to 
form  the  partnership  capital,  or  it  may  be  that  subsequently 
acquired  in  partnership  dealings.  It  may  be  either*  real  'or  per- 
sonal. Unless  provided  otherwise  by  the  articles  or  by  statute, 
there  is  no  limit  to  the  kind  or  amount  of  the  property  which 
the  firm  may  possess. 

Somewhat  different  rules  apply  when  the  property  is  real 
estate,  and  these  will  be  made  the  subject  of  separate  mention. 

§  139.  What  constitutes  partnership  property. — What  prop- 
erty is  partnership  property,  or  when  it  becomes  such,  is  not 
always  easy  to  determine.  "Not  only  all  the  goods  and  mer- 
chandise properly  so  called,"  says  Mr.  Parsons,71  "but  all  chat- 
tels bought  by  the  partnership,  or  otherwise  coming  to  them, 

69  See  post,  §  201,  et  seq.  517,    60    Am.    E.    858;    Bagley    v. 

70 See  Hill  v.  Palmer   (1882),  56  Smith    (1853),    10    N.    Y.    489,    19 

Wis.  123,  14  N.  W.  20,  43  Am.  Eep.  How.  Prac.  1,  61  Am.  Dec.  756. 

703,  Mechem's  Gas.  303;  Treat  v.  71  Parsons  on  Partnership,  §177. 
Hiles  (1887),  68  Wis.  344,  32  N.  W. 

122 


SOME   INCIDENTS  OP  PARTNERSHIP  [§  140 

as  their  furniture,  books,  etc.,  are  partnership  property;  and 
so  also  all  bills  of  exchange  and  notes,  or  other  evidence  of  debts, 
and  all  debts  or  accounts  or  balances,  or  other  claims;  and  all 
shares  in  companies,  or  scrip  bought  with  partnership  funds,  or 
otherwise  assigned  to  the  partnership  and  not  transferred  to 
the  individual  partners  and  charged  in  their  accounts,  would  be 
regarded  as  partnership  property." 

The  Uniform  Partnership  Act  in  general  terms  declares : 
"(1)  All  property  originally  brought  into  the  partnership 
stock  or  subsequently  acquired  by  purchase   or  otherwise  on 
account  of  the  partnership,  is  partnership  property. 

"(2)  Unless  the  contrary  intention  appears,  property  ac- 
quired with  partnership  funds  is  partnership  property."72 

§140.  Same  subject— Property  bought  by  partner  in  his 
own  name. — "Whether  property  bought  by  one  partner  in  his 
own  name  is  partnership  property  depends  upon  the  circum- 
stances and  the  intention.  One  partner  may,  of  course,  buy 
property  for  himself;  but  where  he  takes  title  in  his  own  name 
to  property  bought  with  partnership  funds,  there  is  a  strong 
presumption  that  it  is  partnership  property,  though  he  may 
show  that,  by  arrangement  with  his  partners,  it  was  really  to 
be  his  own ;  as,  for  example,  that  the  funds  were  loaned  to  him 
with  which  to  buy  the  property  on  his  own  account.  If,  how- 
ever, he  takes  title  in  himself  when  it  was  his  duty  to  take  it 
for  the  firm,  the  other  partners  may  require  him  to  secure  to 
them  their  interests  in  it ;  and,  though  he  buys  in  his  own  name, 
if  he  was  really  buying  for  the  firm,  the  firm  is  liable  to  the 
seller.  It  is  simply  the  application  of  the  rules  of  agency,  the 
partners  collectively  being  the  principal,  and  the  partner  the 
agent.73 

72  Sec.  8.  funds  to  buy  railroad  stock  but  took 

73  See  Traphagen  v.  Burt  (1876),  a  certificate  in  the  firm  name,  but 
67  N.  Y.  30;  Davis  v.  Davis  (1882),  it  was  not  a  partnership  transaction, 
60   Miss.   615;    Krusehke  v.   Stefan  the  stock   is   not  partnership  prop- 
(1892),  83  Wis.  373,  53  N.  W.  679.  erty:      Morse    v.    Pacific    Ey.    Co. 

Where   two  partners  in   the   gro-       (1901),  191  111.  356,  61  N.  B.  104. 
eery    business    contributed    outside 

123 


§§  141,  142]  LAW   OF   PARTNERSHIP 

§141.  Same  subject — Property  used  by  the  firm. — Not  all 

property  used  by  the  firm  is  firm  property;  for,  as  has  been 
seen,  the  partners '  contribution  to  the  firm  capital  may  be  simply 
the  use  of  property  and  not  its  title;  and,  during  the  continu- 
ance of  the  relation,  the  firm  may  acquire,  by  lease  or  other- 
wise, the  right  to  use  or  employ  the  individual  property  of  a 
partner  as  well  as  of  a  stranger. 

Where  persons,  who  were  not  then  partners  and  were  not 
acting  for  the  firm  either  actually  or  potentially,  buy  property 
in  their  own  names,  on  their  own  account,  and  with  their  own 
funds,  the  mere  fact  that  they  afterward  become  partners  and 
use  the  property  in  their  partnership  business  is  not  enough  to 
convert  it  into  partnership  property.7*  Some  actual  conveyance, 
or  some  enforceable  agreement  to  convey  or  to  hold  in  trust, 
is  requisite. 

§142.  Partner's  "lien"  on  property. — In  considering  the 
question  of  the  partnership  property,  regard  must  be  had  to 
what  is  usually  called  the  lien  of  the  partners  thereon.  As 
will  be  seen  in  a  later  chapter,75  there  is  deemed  to  arise  from 
the  very  fact  of  the  partnership,  where  nothing  to  the  contrary 
is  agreed  upon,  a  very  important  right  in  each  partner  which 
materially  affects  the  nature  and  extent  of  each  partner's  in- 
terest in  the  partnership  property.  Lord  Lindley  in  his  book 
on  Partnership  has  stated  it  as  follows:  "In  order  to  discharge 
himself  from  the  liabilities  to  which  a  person  may  be  subject 
as  a  partner,  every  partner  has  a  right  to  have  the  property  of 
the  partnership  applied  in  payment  of  the  debts  and  liabilities 
of  the  firm.  And  in  order  to  secure  a  proper  division  of  the 
surplus  assets,  he  has  a  right  to  have  whatever  may  be  due  to 
the  firm  from  his  co-partners,  as  members  thereof,  deducted 
from  what  would  otherwise  be  payable  to  them  in  respect  of 
their  shares  in  the  partnership.  In  other  words,  each  partner 
may  be  said  to  have  an  equitable  lien  on  the  partnership  prop- 

74  See   Robinson   Bank   v.   Miller  (1911),  160  Gal.  774,  118  Pac.  253; 

(1894),  153  111.  244,  38  N.  E.  1078,  Taber-Prang    Art     Co.     v.     Durant 

46  Am.  St.  E.  883,  27  L.  E.  A.  449,  (1905),  189  Mass.  173,  75  N.  E.  221 

Mechem  'a  Gas.  195,  Burd.  Gas.  165,  75  Post,  Ch.  XIX. 
(jlilm.  Gas.  171;   Grant  v.  Bannister 

124 


SOME  INCIDENTS  OP  PARTNERSHIP  [§  143 

erty  for  the  purpose  of  having  it  applied  in  discharge  of  the 
debts  of  the  firm ;  and  to  have  a  similar  lien  on  the  surplus  assets 
for  the  purpose  of  having  them  applied  in  payment  of  what 
may  be  due  to  the  partners  respectively,  after  deducting  what 
may  be  due  from  them,  as  partners,  to  the  firm. ' ' 

Translating  this  into  terms  of  tenancy  in  common,  it  might 
be  said  of  two  equal  partners  that  each  was  the  owner  of  an 
undivided  one-half  of  all  the  partnership  property  subject  to 
a  lien  thereon  in  favor  of  his  co-partner  to  secure  the  applica- 
tion of  the  property  to  partnership  purposes.  Reciprocally,  the 
partner  whose  share  was  thus  subject  to  this  lien  would  have 
a  similar  lien  for  a  similar  purpose  on  his  co-partner's  share. 
So  long  as  this  lien  continued  any  sale  or  transfer  of  a  part- 
ner's interest  must  usually  and  necessarily  be  made  subject  to  it. 

Notwithstanding  this  use  of  the  word  lien,  however,  the  actual 
situation,  as  will  be  seen,  cannot  adequately  be  expressed  in 
mere  terms  of  lien. 

§  143.  Nature  of  each  partner's  interest  in  the  firm  property. 

— In  the  absence  of  any  special  agreement  prescribing  a  differ- 
ent rule,  all  the  members  of  the  firm  are  interested  in  the  whole 
of  the  partnership  property.  They  are,  however,  strictly  speak- 
ing, neither  mere  joint  tenants  nor  mere  tenants  in  common 
though  they  are  often  spoken  of  as  such,  and  though  their  rela- 
tion has  some  of  the  characteristics  of  each  of  those  tenancies. 
It  has  a  form  of  survivorship,  but,  unlike  ordinary  joint  ten- 
ancies, the  surviving  partner  has  not  a  complete  beneficial  owner- 
ship. It  is  somewhat  like  tenancy  in  common,  but,  unlike  that 
relation,  one  partner  has  no  such  freedom  in  transfering  his 
interest  and  putting  the  transferee  into  his  place,  that  a  tenant 
in  common  has.  The  rights  of  the  firm  creditors,  and  the  right 
of  each  partner,  often  called  a  lien,  to  have  firm  property  used 
to  pay  firm  debts,  materially  affect  the  nature  of  each  partner's 
interest  in  the  firm  property.  The  result  is  that  the  partners 
hold  by  a  peculiar  tenure,  and  are  the  possessors  of  a  peculiar 
interest.  That  interest — regarded  as  transferable  property 
rather  than  a  m^re  right  to  share  in  current  profits  and  par- 
ticipate in  the  conduct  of  the  business,  and  assuming  the  part- 

125 


§§  144,  145]  LAW  OF  PARTNERSHIP 

ners'  liens  to  be  still  in  force — is  simply  each  partner's  share 
in  whatever  surplus  may  remain  after  the  debts  and  obligations 
of  the  firm  are  paid.76  It  is  a  right,  not  to  partition  or  distribu- 
tion of  the  property  in  kind,  but  to  have  the  assets  sold  and 
the  proceeds  divided  after  the  payment  of  partnership  debts 
and  obligations.  The  partners  may,  indeed,  by  agreement,  divide 
the  surplus  of  the  property  after  the  payment  of  the  debts,  in 
kind,  if  they  see  fit  to  do  so,  but  neither  can  claim  such  a  division 
as  a  matter  of  right;  and  if  the  estate  is  settled  in  court  the 
property  will  be  sold  and  the  surplus  divided  in  money.77  The 
rule  is  the  same  whether  the  property  is  real  or  personal. 

§  144.  Although  the  interest  of  each  partner  in  the  part- 
nership property  cannot  be  completely  assimilated  to  that  of  a 
joint  tenant  or  tenant  in  common,  many  courts  have  been  slow 
to  recognize  that  fact,  or  to  realize  that  a  distinct  form  of  tenure, 
namely,  a  tenancy  in  partnership  had  in  reality  been  developed. 
Some  courts,  however,  have  recognized  it,78  and  the  Uniform 
Partnership  Act  frankly  declares  that  "A  partner  is  co-owner 
with  his  partners  of  specific  property  holding  as  a  tenant  in 
partnership. ' ' 79 

It  also  declares  that  "A  partner's  interest  in  the  partnership 
is  his  share  of  the  profits  and  surplus,  and  the  same  is  personal 
property."80 

§145.  Extent  of  each,  partner's  interest. — This  share  or  in- 
terest of  each  partner  is  obviously  made  up  of  two  kinds  of 
items :  1.  That,  if  anything,  which  is  due  to  be  returned  to  him 

76  See  Sindelare  v.  Walker  (1891),      an,  504,  Ames'  Gas.  173,  Burd.  Gas. 
137  111.  43,  27  N.  E.  59,  31  Am.  St.      166. 

B.  353,  Mechem's  Cas.  194;  Menagh  Under  Uniform  Partnership  Act, 

v.  Whitwell   (1873),  52  N.  Y.  146,  sec.  38,  each  partner  has  a  right  to 

11    Am.    Ecp.    683,    Meehem  's    Cas.  distribution  * '  in  cash. ' ' 

567,  Ames '  Cas.  229,  Burd.  Cas.  222,  78  See    Preston   v.    Fitch    (1893), 

Oilm.   Cas.   251;    Staats   v.  Bristow  137  N.  Y.  41,  33  N.  E.  77;  Murrell 

(1878),  73  N.  Y.  264,  Mechem's  Cas.  v.  Mandlebaum  (1892),  85  Tex.  22, 

192,  Gilm.  Cas.  211;  Nichol  v.  Stew-  19  S.  W.  880,  34  Am.  St.  R.  777. 

art  (1880),  36  Ark.  612.  79  Sec.  25. 

77  Wild  v.  Milne  (1859),  26  Beav-  80  Sec.  26. 

126 


SOME  INCIDENTS  OF  PARTNERSHIP  [§  146 

on  account  of  his  advances  and  his  contributions  to  capital.81 
2.  That,  if  anything,  which  is  due  to  him  on  account  of  profits.82 
No  final  distribution  of  profits,  of  course,  can  take  place  until 
the  contributions  to  capital  have  been  restored  or  provided  for. 
The  ratio  of  distribution  of  the  two  funds — capital  and  profits 
— may  be  the  same,  but  it  is  not  necessarily  so.  It  will  be  the 
same  where  the  parties  have  agreed  that  profits  or  losses  are 
to  be  divided  in  the  same  proportions  as  the  contributions  to 
capital;  but,  where  nothing  is  shown  respecting  such  an  agree- 
ment, it  will  be  presumed  that  the  profits  and  losses  are  to  be 
shared  equally.  This  will  be  the  presumption  even  though  it 
appears  that  the  contributions  to  capital  were  unequal.83  Speak- 
ing of  shares  in  this  sense,  that  is,  of  shares  in  the  profits  and 
losses  as  distinct  from  contributions  to  capital,  Mr.  Justice  Lind- 
ley  says:  "Whether  partners  have  contributed  money  equally 
or  unequally,  whether  they  are  or  are  not  on  a  par  as  regards 
skill,  connection  or  character,  whether  they  have  or  have  not 
labored  equally  for  the  benefit  of  the  firm,  their  shares  will  be 
considered  as  equal  unless  some  agreement  to  the  contrary  can 
be  shown  to  have  been  entered  into. ' ' 84 

§146.  The  transfer  of  shares. — Such  being  the  nature  as- 
cribed to  a  partner's  share  or  interest,  it  is  clear  that  he  has  no 
individual  title  to  any  specific  article  or  portion  of  the  part- 
si  See  post,  §  468.  contrary  is  found  in  the  cases,  espe- 

82  See  post,  §  §  466-468.  cially    where    one    definite    sum    of 

83  1  Lindley  on  Partnership  (Ew-  money  as  capital  is  contrasted  with 
ell's  2d  Am.  ed.)  348,  349;  Eobinson  another,  as  in  Pirtle  v.  Penn  (1835), 
v.  Anderson   (1855),  20  Bevan,  98;  3  Dana  (Ky.)  247,  28  Am.  Dec.  70, 
Peacock  v.  Peacock  (1809),  16  Ves.  Mechem's   Gas.   313.     See  also  per 
49;   Taft  v.  Schwamb  (1875),  80  111.  Hoffman,  J.,  in  Hasbrouck  v.  Childs 
289;  Ligare  v.  Peacock  (1884),  109  (1858),   3   Bosw.   16   N.   Y.    Super. 
111.     94;     Whitcomb     v.     Converse  105;    Eaymond  v.   Putnam    (1862), 
(1875),  119  Mass.  38,  20  Am.  Eep.  44  N.  H.   160,  Gilmore's  Gas.  490, 
311;  Mechem's  Gas.  692,  Burd.  Gas.  was  a  case  where   the  parties  had 
575;   Woelfel  v.  Thompson   (1899),  expressly  agreed  to  share  profits  and 
173  Mass.  301,  53  N.  E.  819;  Huger  losses  equally  although  their  contri- 
v.  Cunningham  (1906),  126  Ga.  684,  butions   to   capital  were   unequal. 
56    S.    E.     64;     Frazer    v.    Linton  841  Lindley  on  Partnership   (Ew- 
(1897),  183  Pa.  186,  38  Atl.  589.  ell's  2d  Am.  ed.)   349. 

An    occasional    statement    to    the 

127 


§146] 


LAW  OP  PARTNERSHIP 


nership  property,  and  hence  can  neither  assign,  sell  nor  mort- 
gage any  particular  portion  of  it  as  his  own.  The  utmost  that 
he  alone  can  do  is  to  transfer  his  share  or  interest  in  the  whole 
assets,  subject  to  the  other  partner's  lien,  and  the  value  of  such 
share  or  interest  can  only  be  conclusively  determined  upon  an 
accounting  of  the  partnership  affairs.85  Of  this  nature  only, 
therefore,  is  the  right  which  is  transferred  by  a  partner's  sale 
or  assignment  of  his  interest,  or  which  passes  to  his  representa- 
tive upon  his  death,  or  which  can  be  reached  by  his  separate 
creditor,86  or  which  can  be  claimed  by  the  legatee  under  his 
will,  or  which  devolves  upon  his  assignee  in  bankruptcy  or  in- 
solvency. 

The  Uniform  Partnership  Act  denies  the  right  of  a  partner 
alone  to  assign  his  interest  in  specific  partnership  property.87 

A  partner  may,  indeed,  transfer  such  interest  as  he  has,88  and 


85  Collins'  Appeal  (1883),  107  Pa. 
590,  52  Am.  Eep.  479;  Whigham's 
Appeal   (1869),  63  Pa.  194;   Sinde- 
lare  v.  Walker    (1891),  137  111.  43, 
27  N.  E.  59,  31  Am.  St.  E.  353,  Me- 
chem's  Gas.  194,  Burd.  Gas.  304;  Me- 
nagh  v.  Whitwell  (1873),  52  N.  Y. 
146,  11  Am.  Eep.  683,  Mechem  's  Gas. 
567,  Ames  Gas.  239,  Burd.  Gas.  222, 
Gilm.    Gas.    251;    Sloan    v.    Wilson 
(1897),  117  Ala.  583,  23     So.  145; 
Pratt    v.    McGuinness    (1899),    173 
Mass.  170,  53  N.  E.  380,  Gilm.  Gas. 
212;    McKee  v.   Covalt    (1905),   71 
Kan.  772,  81  Pae.  475,  Gilm.  Gas. 
213. 

86  See   following  section;    Walter 
v.  Herman  (1901),  110  Ky.  800,  62 
S.  W.  857,  Gilm.  Gas.  575. 

Successive  seizures  of  all  partners ' 
sJtares — Theoretically  and  by  the 
weight  of  authority  the  partnership 
title  would  not  be  divested,  even 
though  the  share  of  every  partner 
were  seized  or  acquired  by  his  sepa- 
rate creditor.  See  Menagh  v.  Whit- 


well  (1873),  52  N.  Y.  146,  11  Am. 
Eep.  683,  Mechem 's  Gas.  567,  Ames' 
Gas.  229,  Burd.  Gas.  222,  Gilm.  Gas. 
251;  Johnson  v.  Shirley  (1898), 
152  Ind.  453,  53  N.  E.  459;  Osborn 
v.  McBride  (1876),  3  Sawy.  (U.  S. 
C.  C.)  590. 

Contra:  See  Doner  v.  Stauffer 
(1829),  1  Pen.  &  W.  (Pa.)  198,  21 
Am.  Dec.  370,  Ames'  Gas.  302,  Burd. 
Gas.  218,  Gilm.  Gas.  247;  Stahl  v. 
Osmers  (1897),  31  Oreg.  199,  49 
Pac.  958,  Mechem 's  Gas.  579,  Burd, 
Gas.  237. 

87 "A  partner's  right  in  specific 
partnership  property  is  not  assigna- 
ble except  in  connection  with  the  as- 
signment of  the  rights  of  all  the 
partners  in  the  same  property." 
Sec.  25,  subd.  2(&). 

88  See  Patterson  v.  Atkinson 
(1897),  20  R.  I.  102,  37  Atl.  532, 
Burd.  Gas.  241;  State  Bank  v. 
Kelley  (1896),  47  Neb.  678,  66  N. 
W.  619,  Burd.  Gas.  243. 


128 


SOME  INCIDENTS  OF  PARTNERSHIP        [§§  147, 14S 

this  limited  interest  will  often  be  held  to  pass  under  a  convey- 
ance by  which  he  has  attempted  to  transfer  a  greater  right.89 

§  147.  The  transfer  of  his  interest,  however,  does  not 

operate  to  introduce  the  grantee  into  the  firm,  but,  if  complete 
and  final,  it  is  ordinarily  said  to  dissolve  the  partnership,90 
leaving  to  the  grantee  the  right  to  the  value  of  the  share  ac- 
quired as  determined  by  the  final  accounting. 

An  exception  to  this  rule  of  dissolution  exists  in  joint-stock 
companies,  mining  partnerships,  and  others  in  which,  by  statute 
or  agreement,  the  shares  of  the  members  are  transferable. 

The  Uniform  Partnership  Act  declares  that  an  assignment  by 
a  partner  of  his  interest  in  the  partnership  does  not  per  se  dis- 
solve the  partnership,  or,  as  against  the  other  partners  in  the 
absence  of  agreement,  entitle  the  assignee  to  interfere  in  man- 
agement or  administration,  or  to  require  information  or  inspect 
the  books,  but  merely  gives  him  the  right  to  receive  the  assign- 
ing partner 's  share  of  the  profits.  If  dissolution  does  ensue,  the 
assignee  may  then  receive  his  assignor's  share,  and  may  require 
an  account  since  the  date  of  the  last  accounting  agreed  to  by 
all  of  the  partners.91 

§  148.  Seizure  of  partner's  share  by  his  individual  creditor. — 

Notwithstanding  this  rather  intangible  nature  ascribed  to  the 
partner's  interest  in  the  partnership  property,  it  is  in  most 
States  still  regarded  by  the  law  courts  as  so  far  tangible  that 
it  may  be  seized  and  sold  upon  a  common  law  writ  of  execution 
at  the  suit  of  his  individual  creditor,92  — a  thing  not  permitted, 

89  See    Carrie    v.    Cloverdale    Co.  (1888),  115  Ind.  45,  17  N.  E.  262, 
(1891),  90  Cal.  84,  27  Pa.  58.  7  Am.  St.  E.  403;   Nixon  v.  Nash 

90  See  post,  §§363,  364.  (1861),    12    Ohio    St.    647,   80   Am. 

91  Sec.  27,  Appendix.  Dec.     390;     Morrison    v.    Blodgett 

92  See,     in    general,    Newhall    v.  (1836),     8     N.     H.     238,    29    Am. 
Buckingham  (1853),  14  111.  405,  Me-  Dec.     653;     Hutchinson    v.    Dubois 
chem's  Gas.  788;  Hershfield  v.  Claf-  (1881),  45  Mich.  143,  7  N.  W.  714; 
lin    (1881),   25   Kan.    166,   37    Am.  Whigham's  Appeal    (1869.),  63  Pa. 
Bep.  237,  Mechem's  Gas.  792;  John-  St.  194;  Moody  v.  Payne  (1817),  2 
son  v.  Wingfield    (1897),  42  S.  W.  Johns.  Ch.   (N.  Y)  548,  Ames'  Gas. 
203    (Tenn.    Ch.),    Gilm.    Cas.    515,  296;    Johnson   v.    Evans    (1844),    7 
Burd.  Cas.  406;   Williams  v.  Lewis  Man.    &   G.   240,    Ames'    Cas.   286; 

Mech.  Part.— 9  129 


§148] 


LAW  OP  PARTNERSHIP 


in  the  absence  of  a  statute,  in  the  somewhat  similar  case  of  the 
interest  of  a  corporator  in  a  corporation.  Though  the  right  to 
do  so  in  some  way  is  thus  generally  recognized,  the  greatest 
conflict  exists  as  to  the  method  of  making  the  right  available, 
while  complete  uncertainty  usually  exists  as  to  the  extent  and 
value  of  the  interest  so  seized  and  offered  for  sale.  In  a  few 
States,  the  levy  is  only  upon  the  general  interest  of  the  part- 
ner, and  tangible  property  is  not  disturbed.93  In  a  few  States, 
the  creditor  may  levy  upon  and  sell  the  partner's  interest  in 
specific  items  of  partnership  property ; M  but  usually  where  any 
actual  seizure  is  permitted,  while  the  creditor  may  seize  the 
whole  property  for  the  sake  of  reaching  the  partner's  interest 
therein,  he  may  not  levy  upon  and  sell  specific  portions  of  the 
property.95  In  view  of  the  uncertainty  of  the  interest  sold,  and 


Filley  v.  Phelps  (1847),  18  Conn. 
294. 

In  a  few  States  the  creditor,  hav- 
ing made  a  levy,  may  have  the  aid  of 
equity  to  ascertain  the  extent  of  the 
interest.  See  Place  v.  Sweetzer 
(1847),  16  Ohio  142,  Gilm.  Gas.  511. 

One  partner  may  buy  his  copart- 
ner's interest  at  such  a  sale:  Baird 
v.  Baird  (1837),  21  N.  Car.  (1  Dev. 
&  Bat.  Eq.)  524,  31  Am.  Dec.  399; 
but  not  if  there  was  any  unfairness: 
Perens  v.  Johnson  (1857),  3  Smale 
&  Gif.  419. 

Of  course,  a  levy  upon  the  part- 
nership property  to  reach  a  single 
partner's  interest  must  give  way 
before  a  later  levy  at  the  suit  of  a 
partnership  creditor  if  there  is  not 
enough  for  both,  Eighth  Nat.  Bank 
v.  Fitch  (1872),  49  N.  Y.  539, 
Burd.  Cas.  403;  Walter  v.  Herman 
(1901),  110  Ky.  800,  62  S.  W.  857, 
Gilm.  Cas.  575;  although,  as  will  be 
seen,  post,  §  463,  a  prior  levy  by  a 
partnership  creditor  upon  individual 
property  does  not  give  way  to  a 
later  levy  by  an  individual  creditor: 


See  Meech  v.  Allen  (1858),  17  N. 
Y.  300,  72  Am.  Dec.  465,  Mechem's 
Cas.  677,  Ames'  Cas.  326,  Gilm.  Cas. 
499;  In  re  Sandusky  (1878),  17 
Nat.  Bank.  Eeg.  452,  Burd.  Cas. 
421. 

93  See  Hutchinson  v.   Dubois,  su- 
pra; Blumenfeld  v.  Seward  (1893), 
71  Miss.  342,  14  So.  442   (by  stat- 
ute);  Sanborn  v.  Eoyce  (1882),  132 
Mass.  594,  Gilm.  Cas.  510;  Daniel  v. 
Owens  (1881),  70  Ala.  297;  Eichard 
v.   Allen    (1887),    117    Pa.    199,    11 
Atl.  552,  2  Am.  St.  E.  652. 

It  will  be  observed  that  if  the 
partner's  interest  was  merely  that 
of  a  cotenant  subject  to  a  lien,  the 
property  could  be  seized,  subject  to 
that  lien. 

94  See  Fogg  v.  Lawry  (1878),  68 
Me.  78,  28  Am.  Eep.  19;  Eandall  v. 
Johnson  (1881),  13  E.  I.  338,  Gilm. 
Cas.     508;     Trafford     v.     Hubbard 
(1886),  15  E.  I.  326,  4  Atl.  762,  8 
Atl.     690;     Johnson    v.     Wingfield, 
supra;   Hershfield  v.   Claflin,   supra 
(dictum;. 

95  See  Gerard  v.  Bates  (1888),  124 


130 


SOME   INCIDENTS  OF  PARTNERSHIP 


[§149 


the  hardship  to  the  other  partners  which  must  inevitably  re- 
sult from  seizing  the  firm  property  in  order  to  reach  an  interest 
which  may  ultimately  prove  of  little  value  to  the  purchaser,  it 
is  a  case  pre-eminently  calling  for  legislation  providing  a  more 
appropriate  method,96  and  a  few  States  have  statutes  regulating 
it.97 

§  149.  The  Uniform  Partnership  Act  provides  that  a 

partner's  interest  in  specific  partnership  property  is  not  sub- 
ject to  attachment  or  execution,  except  on  a  claim  against  the 
partnership,98  but  it  provides  that  a  judgment  creditor  of  a 
partner  may  have  an  order  of  court  charging  the  partner's  in- 
terest with  the  payment  of  the  judgment  and  that  a  receiver 


111.  150,  16  N.  E.  258,  7  Am.  St.  R. 
350;  Branch  v.  Wiseman  (1875),  51 
Ind.  1. 

96  See  the  remarks,  on  this  subject, 
in  Sanborn  v.  Eoyce,  supra. 

97  Thus,    for    example,    see    Iowa 
Code,  1897,  §  3977;  Aultman  v.  Ful- 
ler   (1880),   53   Iowa  60,  4  N.  W. 
809,  Gilm.  Cas.  526 

In  Kentucky,  see  Holmes  v.  Mil- 
ler (1897),  41  S.  W.  432,  19  Ky.  L. 
R.  660,  Burd.  Cas.  417. 

In  Georgia,  by  special  statute 
(Code,  1911,  §  3190),  the  partner's 
interest  may  be  reached  by  garnish- 
ment of  the  partnership.  See  Willis 
v.  Henderson  (1871),  43  Ga.  325, 
Ames'  Cas.  311,  Burd.  Cas.  418. 

The  individual  creditor  of  one 
partner  cannot  reach  his  interest  by 
garnishment  of  the  partnership,  un- 
der the  ordinary  statute. 

Neither  can  such  a  creditor  reach 
by  garnishment  the  interest  of  one 
partner  in  the  debts  due  to  the 
partnership.  Peoples  Bank  v.  Shry- 
ock  (1877),  48  Md.  427,  30  Am. 
Rep.  476,  Gilm.  Cas.  513;  Johnson 
T.  King  (1845),  6  Humph.  (Tenn.) 


233,  Ames*  Cas.  306;  Hoaglin  v. 
Henderson  (1903),  119  Iowa  720, 
94  N.  W.  247,  97  Am.  St.  R.  335,  61 
L.  R.  A.  756. 

The  partnership  cannot  be  sub- 
jected to  bankruptcy  procedure  on 
the  bankruptcy  of  one  partner  only. 
Sec.  5ft.  Same  rule  ordinarily  ap- 
plies under  State  insolvency  pro- 
ceedings. See  Dearborn  v.  Keith 
(1849),  5  Gush.  (Mass.)  224;  Han- 
son v.  Paige  (1855),  3  Gray  (Mass.) 
239. 

An  action  in  equity,  e.  g.,  a  cred- 
itor 's  bill  would  not  ordinarily  be 
an  appropriate  method  of  reaching 
one  partner's  interest  in  the  part- 
nership as  there  is  this  legal  rem- 
edy; but  where  it  was  alleged  that 
there  was  collusion  between  the 
debtor  and  his  partner  to  transfer 
and  cover  up  his  interest  a  creditor 's 
bill  to  set  aside  the  transfer  and 
subject  the  interest  to  the  claim  of 
the  creditor  was  sustained.  Hen- 
derson v.  Farley  Nat.  Bank  (1898)j 
123  Ala.  547,  26  So.  226,  82  Am. 
St.  R.  140. 

98  See  See.  25,  Subd.  C,  Appendix. 


131 


§§  150,  151]  LAW  OF  PARTNERSHIP 

of  such  interest  may  be  appointed  through  whom  the  order  may 
be  made  effectual." 

That  Act  also  provides  that  "the  interest  charged  may  be 
redeemed  at  any  time  before  foreclosure,  or,  in  case  of  a  sale 
being  directed  by  the  court,  may  be  purchased  without  thereby 
causing  a  dissolution: 

(a)  With  separate  property,  by  any  one  or  more  of  the  part- 
ners, or 

(&)  With  partnership  property,  by  any  one  or  more  of  the 
partners  with  the  consent  of  all  the  partners  whose  interests 
are  not  so  charged  or  sold." 1 

It  is  obvious  that  these  provisions  raise  some  new  and  inter- 
esting questions,  not  yet  settled  by  the  authorities. 

0 

2.  Of  the  Title  to  Personal  Property. 

§150.  May  be  held  in  firm  name. — As  has  been  already 
stated,  the  title  to  personal  property  may  be  acquired,  held  and 
disposed  of  by  the  partnership  in  the  firm  name,  whether  the 
name  be  a  personal  or  a  purely  artificial  one,  and  this  is  the 
proper  and  appropriate  jnanner  in  which  the  title  to  such  prop- 
erty should  be  taken,  held  and  transferred.  Bills  of  sale  and 
chattel  mortgages  may  therefore  be  made  to  or  by  the  part- 
nership in  the  firm  name,2  subject  to  the  disabilities,  hereafter  to 
be  noticed,  attaching  to  the  execution  of  instruments  under 
seal.  Choses  in  actiqn,  as  well  as  choses  in  possession,  may  be 
acquired  or  transferred  in  the  name  of  the  firm 

§  151.  May  be  held  in  the  name  of  one  partner  for  the  firm. — 

But  personal  property  may  be  partnership  property  although 
the  title  is  taken  or  held  in  the  name  of  one  partner  only.  It 
may  have  been  so  taken  and  held  with  the  consent  of  all  of  the 

9»  See.  28,  Appendix.  Compare  Wing  (1895),  60  Ark.  561,  31  S. 

Brown  v.  Hutchinsori  [1895],  2  Q.  W.  149,  46  Am.  St.  R.  218,  Me- 

B.  126,  Burd.  Cas.  419  under  Eng-  chem's  Cas.  797,  Burd.  Cas.  161; 

lish  Act.  Chicago  Lumber  Co.  v.  Ashworth 

ISec.  28    (2),  Appendix.  (1881),    26    Kan.    212;    Kellogg   v. 

8 Henderson  v.  Gates  (1889),  52  Olsen  (1885),  34  Minn.  103,  24  N. 

Ark.  371,  12  S.  W.  780;  Hendren  v.  W.  364. 

132 


SOME   INCIDENTS  OF  PARTNERSHIP  [§§152,153 

partners,  in  which  case  their  rights  to  it,  as  between  themselves, 
are  clear;  but  it  may  also  have  been  so  taken  or  held  by  one 
partner  in  violation  of  his  duty  to  the  firm,  but  in  this  case 
also,  as  has  been  seen,  equity  regards  it  as  partnership  property 
and  will  protect  the  rights  of  the  other  partners  in  it. 

§152.  Title  is  in  partners  collectively. — Whether,  however, 
the  title  taken  be  in  the  firm  name  or  in  that  of  one  partner 
for  the  firm,  the  beneficial  ownership  of  the  property  is  not  in 
the  partners  as  so  many  separate  individuals,  but  in  the  part- 
ners collectively  and  as  such.  The  partners  are,  as  has  been 
seen,  neither  mere  joint  tenants  nor  tenants  in  common,  but 
tenants  in  partnership,  while  each  partner  is  merely  the  possessor 
of  that  peculiar  interest  already  described,  known  as  the  part- 
ner's share.  One  partner,  therefore,  as  has  been  already  noted, 
acting  merely  in  his  individual  capacity,  can,  while  the  part- 
nership purposes  remain  unsatisfied,  neither  sell,  assign  nor 
mortgage  any  specific  chattel,  but  simply  all  or  part  of  his  resi- 
duary interest  in  the  whole  assets.8 

It  will  be  observed  that  the  authority  of  one  partner  to  sell 
partnership  property,  as  a  partnership  act,  is  not  here  in  ques- 
tion. 

3.  Of  the  Title  to  Real  Estate. 

§  153.  Older  rule — Legal  title  to  real  property  cannot  ordi- 
narily be  taken  in  firm  name. — Partnership  real  estate  Stands 
upon  peculiar  footing.  It  was  the  common  law  conception  that 
title  to  real  estate  could  vest  only  in  some  person,  either  natural 
or  artificial  (like  a  corporation),  which  could  be  identified  by 
a  particular  name.  A  partnership  was  not  a  person,  but  merely 
a  group  of  individuals,  each  having  his  individual  name.  The 
group  or  partnership,  not  being  a  distinct  legal  person,  could 
have  no  distinctive  group  name.  While,  therefore,  a  partner- 
ship might  have  the  beneficial  ownership  of  land  or  might  deal 
in  land,  it  could  not  take  title  to  land  by  a  conveyance  to  it 
merely  in  the  firm  name.  An  attempted  conveyance  to  the  firm 

3  See  ante,  §§  146,  147. 

133 


§153] 


LAW   OF   PARTNERSHIP 


by  the  firm  name  would  therefore  usually  be  a  nullity  as  a  con- 
veyance (though  it  might  often  operate  as  a  contract  to  con- 
vey).4 This  was  especially  true  where  the  firm  name  was  a 
purely  artificial  one;  though  where  the  firm  name  contained 
the  individual  name  of  one  or  more  of  the  partners  the  courts 
were  quite  ready  to  seize  upon  that  fact  in  order  to  save  the 
conveyance,  and  would  hold  that  the  legal  title  vested  in  the 
partner  or  partners  whose  names  so  appeared,  and  such  part- 
ner or  partners  would  then  hold  the  legal  title  in  trust  for  the 
firm.6 


4 Compare  Tidd  v.  Eines  (1879), 
26  Minn.  201,  where  a  deed  to 
"Todd,  Gorton  &  Co."  was  held  to 
convey  no  legal  title,  with  Byam  v. 
Bickford  (1885),  140  Mass.  31,  2 
N.  E.  687,  which  went  to  the  other 
extreme  and  held  a  deed  to  ''South 
Chelmsford  Hall  Association,"  an 
unincorporated  association,  was  suf- 
ficient to  vest  legal  title  in  the  mem- 
bers as  tenants  in  common.  See  also 
Percifull  v.  Platt  (1880),  36  Ark. 
456;  Burns  v.  McCabe  (1872),  72 
Pa.  309;  Silverman  v.  Kristufek 
(1896),  162  111.  222,  44  N.  E.  430 
(where  it  is  said  that  "a  deed  to 
'Nevins,  Townsend  &  Co.'  passes 
nothing  at  law");  Spaulding  Mfg. 
Co.  v.  Oodbold  (1909),  92  Ark.  63, 
121  S.  W.  1063,  135  Am.  St.  E.  168, 
19  Ann.  Cas.  947,  29  L.  E.  A.  (N. 
S.)  282  (where  conveyance  to 
' '  Spaulding  Manufacturing  Co. ' ' 
was  said  not  to  be  good  at  law  but 
good  in  equity).  In  Trexlar  v.  Af- 
rica (1910),  42  Pa.  Super.  542,  a 
conveyance  to  "American  Stave  & 
Lumber  Co."  which  was  contended 
to  be  the  name,  not  of  a  firm,  but 
of  a  single  individual,  was  held  not 
good. 

&  See  ante,  §123,  and  note. 

See     Percifull     v.     Platt,     supra, 


(where  it  was  said  that  a  deed  to 
"George  F.  Lovejoy  &  Co."  would 
pass  the  legal  litle  to  Lovejoy) ; 
Moreau  v.  Saffarans  (1856),  3 
Sneed  (35  Tenn.)  595,  67  Am.  Dec. 
582  (where  the  same  holding  was 
made  under  a  deed  running  to 
"John  L.  Saffarans  &  Co."); 
Winter  v.  Stock  (1866),  29  Cal. 
407,  89  Am.  Dee.  57  (to  same  ef- 
fect);  Arthur  v.  Weston  (1856), 
22  Mo.  378  (deed  to  "W.W.  Phelps 

6  Co."  vests  title  in  Phelps  only); 
Beaman  v.  Whitney  (1841),  20  Me. 
413  (where  it  was  said  that  a  deed 
to  "Whitney,  Watson  &  Co."  would 
vest  title   in  Whitney   and  Watson 
at  least) ;  Holmes  v.  Jarrett  (1872), 

7  Heisk.   (Tenn.)    506   (to  same  ef- 
fect);    Sherry    v.    Gilmore     (1883), 
58  Wis.  324,  17  N.  W.  252  (tax  deed 
to  "Gilmore  &  Ware"  not  void); 
Cole  v..  Mette   (1898),.  65  Ark.  503, 
47  S.  W.  407,  67  Am.  St.  E.  945, 
Mechem's  Cas.  801    (deed  to  Mette 
&  Kanne,   good) ;    LaFayette   Land 
Co.  v.  Caswell  (1910),  59  Fla.  544, 
52    So.    140,    138    Am.    St.    E.    166 
(same) ;    Dwyer   Pine   Land   Co.   v. 
Whiteman   (1904),  92  Minn.  55,  99 
N.  W.  362   (same). 

Compare  Dunlap  v.  Green  (1894), 
60  Fed.  242,  8  C.  C.  A.  600. 


134 


SOME   INCIDENTS   OF  PARTNERSHIP  [§§154,155 

§154.  But   the   equitable   title   is   in   the   firm. — But 

though,  according  to  the  earlier  view,  the  firm  as  such  cannot, 
in  the  firm  name,  hold  the  legal  title  to  real  estate,  the  equi- 
table title  to  firm  realty  is  in  the  firm,  and  equity  will  ordinarily 
regard  and  protect  the  land  as  partnership  property.  For  this 
purpose,  the  person  or  persons  holding  the  legal  title,  whether 
one  partner  or  all,  will  be  regarded  as  holding  in  trust  for  the 
firm.6 

As  will  be  seen  in  a  later  section,  however,  this  will  not  be 
true  as  against  l)ona,  fide  purchasers  for  value  who,  without 
notice  of  the  trust,  have  purchased  from  the  record  owner  of 
the  legal  title;  and  in  a  few  States,  notably  in  Pennsylvania,7 
the  rights  of  creditors  of  the  one  appearing  upon  the  public 
records  as  the  owner  will  not  be  subordinated  to  the  rights  of 
firm  creditors. 

§  155.  Modern  rule  more  liberal — Uniform  Partnership  Act. 
— Since  names  are  in  any  case  only  labels  by  which  to  identify 
the  persons  whom  they  represent,  and  since,,  even  in  the  case 
of  natural  persons,  the  name  may  not  always  sufficiently  identify 
the  person  and  parol  evidence  is  necessary  to  complete  the  identi- 
fication— as  where  a  deed  of  land  is  made  in  the  name  of  a 
grantee  whose  name  is  the  same  as  that  of  other  persons  in  the 
same  community — it  would  be  only  the  application  of  the  same 
theory — perhaps  slightly  extended — to  hold  that  a  deed  of  lands 
might  be  made  to  a  partnership  in  the  firm  name,. and  that  parol 
evidence  might  be  resorted  to,  when  necessary,  to  identify  the 
persons  represented  by  the  name  and  in  whom  the  title  would 

6  See  Eiddle  v.  Whitehill   (1889),  trust  for  the  firm  although  the  legal 

135  U.  S.  621,  10  Sup.  Ct.  924,  34  title  is  vested  in  all  of  the  partners 

L.  ed.  282;  Paige  v.  Paige  (1887),  in  the  same  manner  and  proportion 

71  Iowa,  318,  32  N.  W.  360,  60  Am.  as  though  they  were  tenants  in  com- 

B.    799;    Harris   v.    Harris    (1891),  mon. 

153    Mass.    439,    26    N.    E.    1117;  7  See  Kepler  v.  Erie  Dime  Savings 

Hatchett  v.  Blanton  (1882),  72  Ala.  Co.  (1882),  101  Pa.  602.     See,  also, 

423;    Shanks  v.   Klein    (1881),  104  in  Maryland,  National  Union  Bank 

U.  S.  18,  Mechem's  Gas.  211,  Gilm.  vs.      National      Mechanics'      Bank 

Cas.  269.  (1894),   80   Md.   371,   30   Atl.   9/13, 

In   Paige   v.    Paige,   supra,   it   is  45   Am.    St.    E.    350,   27    L.    B.   A. 

field  that  the  title  may  be  held  in  476,  Mechem's  Cas.  204. 

135 


§155] 


LAW  OF  PARTNERSHIP 


vest.  This  is,  of  course,  constantly  done  already  in  the  case  of 
ordinary  partnership  contracts,  bills,  notes,  warehouse  receipts, 
bills  of  lading,  and  the  like.  As  has  already  been  stated,  this 
doctrine  has  also  been  applied  in  the  case  not  only  of  chattel 
mortgages  8  but  of  mortgages  upon  land  as  well.9  There  is  also 
a  growing  body  of  authority  that  it  may  be  done  in  the  case 
of  deeds  of  land  to  a  partnership  by  the  firm  name;  and  it  is 
believed  that  no  court,  not  constrained  by  its  own  earlier  de- 
cisions, would  now  hold  such  a  deed  to  be  void  as  a  conveyance 
even  though  the  name  did  not  contain  the  personal  name  of 
any  one  of  the  partners.10 

The  Uniform  Partnership  Act  adopts  this  view  fully,  and 
provides  that  "Any  estate  in  real  property  may  be  acquired  in 
the  partnership  name.  Title  so  acquired  can  be  conveyed  only  in 
the  partnership  name. ' '  n  Further,  ' '  A  conveyance  to  a  part- 
nership in  the  partnership  name,  though  without  words  of  inher- 
itance, passes  the  entire  estate  of  the  grantor  unless  a  contrary 
intent  appears. ' ' 12 


8  See    Hendren    v.    Wing    (1895), 
60  Ark.  561,  31  S.  W.  149,  46  Am. 
St.    B.    218,    Mechem's    Gas.    797, 
Burd.  Gas.  161. 

9  See    Menage    v.    Burke    (1890), 
43  Minn.  211,  45  N.  W.  155,  19  Am. 
St.  E.  235;  Woodward  v.  McAdam 
(1894),  101  Gal.  438,  35  Pac.  1016, 
Mechem's  Gas.  799,  Burd.  Gas.  163; 
Morse  v.  Carpenter   (1847),  19  Vt. 
613. 

10 See  Byam  v.  Bickford  (1885), 
140  Mass.  31,  2  N.  E.  687  (deed  to 
unincorporated  association  by  arti- 
ficial name  good) ;  same,  arguendo. 
Kelley  v.  Bourne  (1887),  15  Oreg. 
476,  16  Pac.  40;  Maugham  v. 
Sharpe  (1864),  17  Com.  Bench  (N. 
S.)  443,  Burd  Gas.  160. 

In  Wray  v.  Wray  [1905],  2  Ch. 
349,  following  Maugham  v.  Sharp, 
a  deed  to  "William  Wray"  which 


was  the  firm  name  of  four  partners, 
was  held  to  vest  title  in  the  part- 
ners. 

More  numerous  are  the  cases  in 
which  the  firm  name  included  some 
of  the  individual  names  of  the  part- 
ners. See  Walker  v.  Miller  (1905), 
139  N.  Car.  448,  52  S.  E.  125,  1 
L.  E.  A.  (N.  S.)  157,  4  Ann.  Gas. 
601,  111  Am.  St.  E.  805  (where  all 
of  the  partners  whose  names  ap- 
peared in  the  firm  name  were  dead 
but  the  family  continued  the  busi- 
ness) ;  Murray  v.  Blaekledge 
(1874),  71  N.  Car.  492;  Blanchard 
v.  Floyd  (1890),  93  Ala.  53,  9  So. 
418;  Kentucky  Block  Coal  Co.  v. 
Sewell  (1918),  —  C.  C.  A.  — ,  249 
Fed.  840. 

11  Sec.  8(3). 

12  Sec.  8(4). 


136 


SOME  INCIDENTS  OF  PARTNERSHIP  [§§  156,  157 

§156.  When  land  is  partnership  property. — Granting  that 
the  form  of  the  conveyance  is  such  that  the  land  might  be  part- 
nership property,  the  question  whether  land  actually  held  in  the 
name  of  one  partner  or  of  all  is  partnership  property  or  not, 
where  there  is  no  unequivocal  evidence  of  the  intention,  is  one 
of  much  importance  and  frequently  of  great  difficulty.  The 
question  may  be  raised  either  by  the  partners  themselves,  or  by 
the  heirs  or  widow  of  a. deceased  partner,  or  by  the  separate 
creditors  of  the  partner  in  whose  name  the  legal  title  may  be 
vested,  claiming  priority  over  the  firm  creditors. 

In  dealing  with  this  question  a  number  of  considerations  are 
important,  but  perhaps  the  most  important  initial  consideration 
is  the  inquiry  whether  the  land  was  acquired  before  or  after 
the  formation  of  the  partnership. 

§  157.  Same  subject — Land  acquired  during1  the  partnership. 

— If  the  land  was  acquired  after  the  formation  of  the  partner- 
ship the  question  of  whose  funds  were  used  in  its  purchase  will 
become  material.  If  the  land  was  bought  with  the  private  and 
not  partnership  funds  of  the  partners,  this  would  ordinarily 
seem  to  suggest  that  the  land  was  to  be  the  private  and  not 
partnership  property  of  the  partners,13  unless  there  was  some- 
thing to  indicate  that  the  amount  of  the  purchase  money  was 
to  be  regarded  as  a  loan  or  advance  by  the  partners  to  the  firm,14 
or  that  its  capital  was  to  be  thereby  increased,  or  the  scope  of 
its  business  extended,  and  the  like.  A  purchase  on  individual 
account  would  be  consistent  with  an  intention  or  agreement  to 
thereafter  sell  or  lease  the  land  to  the  partnership  or  to  permit 
it  to  use  the  land  upon  terms  which  had  been  or  might  be  mu- 
tually agreed  upon. 

If  the  land  was  purchased  with  partnership  funds,  this  would 
ordinarily  seem  to  point  to  ownership  by  the  firm ; 15  but  it  might 

13  See  Wilhite  v.  Boulware  (1889),  land  but  the  legal  title  is  taken  in 
88  Ky.  169,  11  Ky.  L.  E.  59,  10  S.  the  name  of  another,  a  trust  will  or- 
"W.  629.  dinarily  arise  in  behalf  of  him  who 

14  See  Jones  v.  Beckman   (1900),  paid  the  price. 

47  Atl.  71   (N.  J.).  This  rule  has  in  some  States  been 

IB  This  is  commonly  put  upon  the      changed  by  statute,  e.  g.  in  Michi- 

ground  that  where  one  man  pays  for      gan;  nevertheless  substantially  aim- 

137 


§  158]  LAW  OF  PARTNERSHIP 

nevertheless  appear  that  firm  funds  had  been  appropriated  to 
individual  uses  with  intent  to  make  a  purchase  or  investment 
on  individual  account.16  Such  an  appropriation  of  firm  funds 
might  be  in  a  sense  wrongful,  as  where  it  depleted  the  fund  to 
which  firm  creditors  had  a  right  to  look  for  the  satisfaction  of 
their  claims;  or  it  might  be  entirely  unobjectionable,  as  where 
the  firm  had  undivided  profits  to  which  the  partners  were  then 
entitled  and  which  by  agreement  they  distributed  in  this  way 
without  the  formality  of  first  paying  them  over  to  the  several 
partners  who  would  then  use  them  to  make  an  individual  pur- 
chase.17 

The  form  and  purport  of  the  conveyance  may  throw  some  light 
upon  the  question.  Does  the  deed  state  whether  the  land  is  to 
be  firm  or  individual  property?  Are  the  proportions  in  which 
the  title  vests  the  same  as  or  different  from  those  which  the  ratio 
of  the  partners'  interests  would  suggest  for  a  partnership  pur- 
pose? and  the  like. 

§158.  The  chief  criterion  by  which  the  question  is  to 

be  determined,  it  was  declared  in  a  leading  case,  is  the  intention 
of  the  partners.  "That  intention,"  said  the  court,18  "may  be 
expressed  in  the  deed  conveying  the  land,  or  in  the  articles  of 
partnership ;  but  when  it  is  not  so  expressed,  the  circumstances 
usually  relied  upon  to  determine  the  question  are  the  ownership 

ilar  results  are  there  arrived  at.    See  vent  firm  to  buy  each   of  the  two 

Way  v.  Stebbins    (1882),  47  Mich.  partners  a  home);  Chandler  v.  Jes- 

296,  11  N.  W.  166.  sup    (1892),    132    Ind.    351,    31    N. 

It  need  not  actually  be  used  in  E.  1109  (where  money  was  with- 
the  firm  'a  business  to  be  firm  prop-  drawn  from  the  firm 's  assets  by  mu- 
erty  when  bought  with  firm  funds.  tual  consent  to  make  individual  pur- 
It  may  be  a  firm  investment:  Fos-  chase);  City  of  Providence  v.  Bul- 
ter  v.  Sargent  (1903),  72  N.  H.  lock  (1884),  14  E.  I.  353  (where 
170,  55  Atl.  423.  land,  though  purchased  with  part- 

The  Uniform  Partnership  Act  pro-  nership  funds,  was  treated  and  car- 

vides  that  "unless  the  contrary  in-  ried  as  individual  property), 

tention    appears,   property    acquired  17  See    cases    cited    in    preceding 

with  partnership   funds  is  partner-  note, 

ship  property."     See.   8(2).  ISEobinson       Bank      v.       Miller 

16  See  Frey  v.  Eisenhardt  (1898),  (1894),  153  111.  244,  38  N.  E.  1078, 

116  Mich.  160,  74  N.  W.  501  (where  46  Am.  St.  R.  883,  27  L.  E.  A.  449, 

money  was  withdrawn  from  a  sol-  Mechem's  Gas.  195,  Burd.  Cas.  165. 

138 


SOME   INCIDENTS   OF  PARTNERSHIP 


[§159 


of  the  funds  paid  for  the  land,  the  uses  to  which  it  is  put,  and 
the  manner  in  which  it  is  entered  upon  the  books  of  the  firm.19 
Where  real  estate  is  bought  with  partnership  funds  for  partner- 
ship purposes,  and  is  applied  to  partnership  uses,  or  entered 
and  carried  in  the  accounts  of  the  firm  as  a  partnership  asset, 
it  is  deemed  to  be  firm  property ;  and,  in  such  case,  it  makes  no 
difference,  in  a  court  of  equity,  whether  the  title  is  vested  in  all 
the  partners  as  tenants  in  common,  or  in  one  of  them,  or  in  a 
stranger.20  If  the  real  estate  is  purchased  with  partnership 
funds,  the  party  holding  the  legal  title  will  be  regarded  as  hold- 
ing it  subject  to  a  resulting  trust  in  favor  of  the  firm  furnishing 
the  money.  In  such  case  no  agreement  is  necessary,  and  the 
statute  of  frauds  has  no  application."21 

§  159.  For  the  purposes  of  the  present  question,  land 

purchased  upon  partnership  credit  would  be  deemed  to  be  pur- 
chased with  partnership  funds;  and  money  paid  on  account  of 


19  Citing  here,  1  Bates  on  Part- 
nership, §  280 ;  2  Lindley  on  Part- 
nership, marg.  p.  649;  17  Am.  & 
Eng.  Ency.  of  Law,  945.  In  Lind- 
say v.  Eace  (1894),  103  Mich.  28, 
61  N.  W.  271,  it  is  said:  "Whether 
lands  held  in  the  name  of  one  part- 
ner or  of  both  are  to  be  deemed 
copartnership  property  is  generally 
a  question  of  intent,  to  be  gathered 
from  the  manner  in  which  the  mem- 
bers of  the  firm  have  dealt  with 
them.  While  the  fact  that  the  funds 
of  the  copartnership  have  been  used 
in  paying  for  the  lands,  when  origi- 
nally purchased  or  subsequently,  is 
not  conclusive  of  this  intent,  yet  it 
is  persuasive  evidence,  and  when, 
as  in  this  case,  it  is  accompanied 
by  the  entry  of  the  transaction  OH 
the  firm  books  as  a  copartnership 
transaction,  under  circumstances 
which  import  a  daily  declaration 
that  it  was  so  regarded,  it  is  con- 
vincing. ' ' 


20  Citing  here,   Parsons   on  Part- 
nership (4th  ed.),  §  265;  1  Bates  on 
Partn.,     §  281 ;     Johnson    v.     Clark 
(1877),  18  Kan.  157.     To  same  ef- 
fect:   Page   v.    Thomas    (1885),   43 
Ohio  St.  38,  1  N.  E.  79,  54  Am.  E. 
788;    Collner   v.   Greig    (1890),   137 
Pa.  606,  20  Atl.  938,  21  Am.  St.  E. 
899;   Pepper  v.   Thomas   (1887),  85 
Ky.  539,  4  S.  W.  297,  9  Ky.  L.  B. 
122;   Boss  v.  Henderson    (1877),  77 
N.  C.  170;  Eoberts  v.  Eldred  (1887), 
73  Cal.  394,  15  Pac.  16. 

21  Citing  here,  Parker  v.  Bowles, 
57  N.  H.  491;  Bates  on  Partn.,  su- 
pra.     To    same    effect:    Eiddle    v. 
Whitehall  (1889),  135  TJ.  S.  621,  10 
Sup.  Ct.  924,  34  L.  ed.  282;  Way  v. 
Stebbins  (1882),  47  Mich.  296,  11  N. 
W.  166;  Paige  v.  Paige   (1887),  71 
Iowa   318,   32   N.   W.   360,   60   Am. 
E.    799,    Mechem's    Gas.    217;    Gal- 
braith  v.  Tracy   (1894),  153  111.  54, 
38  N.  E.  937,  28  L.  E.  A.  129,  46 
Am.  St.  E.  867,  Burd.  Gas.  257. 


139 


§  160]  LAW  OP  PARTNERSHIP 

the  firm,  as  a  loan  or  advancement  to  it,  or  as  an  increase  of  its 
capital,  would  be  deemed  partnership  funds,  although  for  con- 
venience sake  it  was  paid  directly  for  the  land  and  was  not 
passed  through  the  partnership  treasury. 

So,  also,  land  acquired  by  part  or  all  of  the  partners  before 
the  partnership  was  actually  organized  but  practically  contem- 
poraneously and  in  contemplation  of  it,  and  for  firm  purposes, 
may  be  found  to  be  a  firm  purchase  and  to  constitute  firm  prop- 
erty, though  the  title  was  taken  in  individual  names  and  paid 
for  with  individual  funds,  if  those  funds  were  really  contribu- 
tions to  firm  capital  or  assets  and  were  paid  directly  to  the  seller 
of  the  land  instead  of  being  first  turned  into  firm  funds  and 
then  used  in  the  purchase.22 

§  160.  Same  subject — Land  acquired  prior  to  the  partner- 
ship.— Where  the  land  was  purchased  or  acquired  in  their 
individual  capacity  by  persons  who  thereafter  became  partners 
or  some  of  them,  the  question  whether  it  has  been  converted 
into  partnership  land  is  one  of  greater  difficulty,  and  the  au- 
thorities cannot  be  reconciled.  In  the  case 2S  quoted  from  in 
the  preceding  section  it  is  said:  "The  theory  of  some  of  the 
cases  is  that  real  estate  bought  with  separate,  and  not  partner- 
ship, funds  cannot  be  converted  into  firm  property  by  a  verbal 
agreement  between  the  partners,  because  no  trust  can  be  created 
in  lands  unless  by  writing,  in  view  of  the  statute  of  frauds, 
except  such  as  results  by  implication  of  law.24  There  are  cases 
which  hold  that,  even  though  the  land  'was  originally  bought 
by  the  several  partners  with  their  individual  funds,  and  deeded 
to  them  as  tenants  in  common,  yet  it  will  be  regarded  in  equity 
as  firm  property  where  it  is  improved  out  of  partnership  funds 
for  firm  purposes,  and  actually  used  for  such  purposes,  or  where 
the  firm  puts  valuable  and  permanent  improvements  upon  it  for 
firm  purposes,  and  which  are  essential  to  the  firm.  In  some  in- 

22  This  is  well  illustrated  in  Bopp  (1894),  153  111.  244,  38  N.  E.  1078, 

v.  Fox    (1872),   63  111.   540;    Ames  46  Am.  St.  E.  883,  27  L.  E.  A.  449, 

v.  Ames  (1888),  37  Fed.  30.  Mechem's  Gas.  195,  Burd.  Cas.  165, 

See,  also,  Collins  v.  Decker  (1879),  Gilm.    Cas.    171. 

70  Me.  23.  24  Citing  here,   Parker  v.   Bowles 

28Bobinson      Bank      v.       Miller  (1876),  57  N.  H.  491. 

140 


SOME  INCIDENTS  OF  PARTNERSHIP  [§  161 

stances  the  land  is  held  to  be  the  property  of  the  partners,  and 
the  improvements  to  be  the  property  of  the  firm.25 

"The  use  of  the  property  is  not  conclusive  of  its  character 
as  real  estate  or  personalty,  but  is  only  evidence  of  the  inten- 
tion of  the  parties.  When  the  intention  of  the  partners  to  con- 
vert the  land  into  firm  property  is  inferred  from  circumstances, 
the  circumstances  must  be  such  as  do  not  admit  of  any  other 
equally  reasonable  and  satisfactory  explanation.26  And  where 
it  is  sought  to  show  a  conversion  of  the  land  into  personalty  by 
agreement  of  the  partners,  such  agreement  must  be  clear  and 
explicit. ' ' m 

§  161.  The  difficulty  which  arises  here  is,  of  course,  one 

chiefly  resulting  from  the  requirements  of  the  statute  of  frauds. 
The  title,  by  the  hypothesis,  being  in  the  individuals  or  some  of 
them,  and  having  been  so  acquired  before  the  partnership  be- 
gan, it  can  only  be  vested  in  the  firm  by  either  (1)  some  actual 
conveyance,  or  (2)  by  some  agreement  to  convey  or  hold  in  trust 
which  is  capable  of  being  specifically  enforced.  Under  this 
second  head  the  statute  of  frauds  must  either  be  complied  with 
or  avoided  in  some  way.  In  order  to  comply  with  the  statute, 
there  must  be  either  a  written  contract  or  declaration  of  trust, 

25  Citing  1  Bates  on  Partnership,  to    convert    the    property   into   firm 
§§  281,  282,  285.    See  also,  Deveney  property  as  against  individual  cred-' 
v.   Mahoney    (1872),   23   N.  J.   Eq.  itors.     Compare  Goldthwaite  v.  Jan- 
247.  ney    (1894),    102   Ala.   431,   15   So. 

26  Citing  Parsons  on  Partnership,  560,  28  L.  R.  A.  16,  Mechem's  Gas. 
§  267.  804,  Burd.  Cas.  176;  Alkire  v.  Kahle 

27  Citing   17    Am.   &   Eng.    Ency.  (1888),  123  111.  496,  17  N.  E.  693, 
of  Law,  954.  5  Am.  St.  R.  540. 

In  National  Union  Bank  v.  Na-  In  Goepper  v.  Kinsinger  (1883), 

tional  Mechanics'  Bank   (1895),  80  39  Ohio  St.  429,  the  land  was  bought 

Md.  371,  30  Atl.  913,  27  L.  E.  A.  and  improved  by  a  father.     Later 

449,  45  Am.  St.  E.  350,  Mechem's  he    formed   a  partnership   with   his 

Cas.  204,  it  is  said  that  where  the  sons  and   they   carried  on  business 

land  was   originally   owned   by   the  on    this    property.      There    was    no 

partners     as     individuals,     and     so  evidence  of  any  agreement,  contract 

stands    upon    the    public     records,  or  conveyance  to  make  the  property 

something  more  than  the  mere   in-  firm  property.  Held  that  it  remained 

tent  of  the  partners  or  the  entries  individual  property, 
upon  their  own  books  is  necessary 

141 


§  161]  LAW  OP  PARTNERSHIP 

or  an  oral  contract  or  declaration  of  which  some  note  or  memo- 
randum in  writing,  signed  by  the  parties  to  be  charged,  can  be 
produced.  In  order  to  avoid  the  effect  of  the  statute,  there 
must  be  such  part  performance  of  an  oral  contract  to  convey 
to  the  partnership  as  will  enable  a  court  of  equity  to  decree 
specific  performance  even  though  there  be  no  note  or  memoran- 
dum. If  the  title  is  in  part  of  those  only  who  subsequently  be- 
come the  partners,  there  must  of  course  be  found  some  valid 
conveyance,  agreement  to  convey  or  declaration  of  trust  in  favor 
of  all,  in  order  to  make  the  land  firm  property.  If  the  title  is  in 
all  of  those  who  subsequently  become  the  partners,  stiH,  since 
the  rights  of  partners  are  different  from  those  of  mere  tenants 
in  common,  there  must  here  also  be  some  agreement  or  situation 
of  trust  which  equity  can  enforce. 

Since,  by  the  hypothesis,  there  was  no  partnership  and  hence 
no  partnership  funds  in  existence  at  the  time  the  title  was  ac- 
quired, there  can  here  be  no  such  resulting  or  constructive  trust, 
arising  from  the  payment  of  firm  funds,  as  is  referred  to  in  the 
preceding  sections. 

The  agreement  which  equity  may  enforce  in  these  cases  need 
not  be  express  or  formal;  quite  informal  agreements  or  under- 
standings, if  sufficiently  established,  have  often  sufficed.28 

The  note  or  memorandum  which  will  satisfy  the  statute  of 
frauds  may  often  be  found  in  entries  or  memoranda  in  the  part- 
nership books,  if  they  are  sufficiently  signed,  etc.,29  while  the 
part  performance  which  may  save  the  contract  may  often  be 
found  in  the  fact  that  the  firm  has  taken  possession  and  made 
valuable  improvements  upon  the  land.30  Where  the  title  is  in 

28 See  Johnson  v.  Hogan   (1909),  the   statute   of   frauds,"   then   the 

158  Mich.  635,  123  N.  W.  891,  37  firm  creditors  might  be  given  prior- 

L.  R.  A.   (N.  S.)   889.  ity  over  the  separate  creditors. 

29  Thus  in  National  Union  Bank  30  See  Eoberts  v.  McCarty  (1857), 
v.  National  Mechanics  Bank  (su-  9  Ind.  16,  68  Am.  Dec.  604. 
pro)  the  court  said  that  if  the  prop-  On  the  other  hand,  the  improve- 
erty  in  dispute  had  been  so  used  as  ments  may  have  been  made  merely 
to  indicate  a  purpose  to  put  it  into  as  compensation  for  the  use  of  the 
the  business  as  capital  and  had  been  land — which  was  to  remain  indi- 
"  entered  on  the  books  of  the  firm  vidual  property,  or  with  the  inten- 
ts such  a  way  as  to  comply  with  tion  that  the  firm  would  acquire  an 

142 


SOME  INCIDENTS  OF  PARTNERSHIP  [§  162 

all  of  those  who  become  the  partners,  something  persuasive  of 
a  change  from  their  prior  relation  of  tenants  in  common  (who 
are  possessing  and  improving  their  own  property  as  such)  to 
that  of  partners  is  essential.31  As  pointed  out  in  the  preceding 
sections,  mere  use  of  the  property  by  the  firm  is  not  enough, 
since  that  is  quite  as  consistent  with  a  tenancy  or  license  as 
with  a  partnership  tenure. 

As  is  also  pointed  out  in  a  previous  section,  the  purchase  of 
land,  although  made  before  the  firm  was  actually  organized,  may 
be  so  practically  contemporaneous  with  it,  and  in  contemplation 
of  it,  as  to  be  fairly  regarded,  so  far  as  the  present  questions 
are  concerned,  as  a  purchase  made  during  the  partnership  and 
with  its  funds.32 

§162.  Nature  of  partner's  interest  in  partnership  realty. — 
The  interest  of  each  partner  in  the  partnership  real  estate, — 
not  now  speaking  merely  of  the  legal  title  and  how  it  may  be 
held — like  his  interest  in  the  partnership  personal  property,  is 
not  a  title  to  any  specific  parcel  or  to  any  specific  portion,  but 
simply  an  interest  in  the  residue  after  the  partnership  debts 
have  been  paid  and  its  affairs  are  wound  up.33  Until  that  pur- 
pose is  accomplished,  therefore,  he  can  sell,  assign  or  mortgage 
no  greater  interest  in  his  own  right,  nor  can  more  be  taken  upon 
process  against  him  at  the  suit  of  his  individual  creditors. 

interest  in  the  improvements  only.  sively  show  an  intention  to  treat 
See  Frink  v.  Branch  (1844),  16  them  as  such,"  citing  Grubb's  Ap- 
Conn.  260.  peal  (1870),  66  Pa.  117;  Kobin- 
31  Thus  in  Taber-Prang  Art  Co.  v.  son  Bank  v.  Miller,  supra;  Frink 
Durant  (1905),  189  Mass.  173,  75  v.  Branch  (1844),  16  Conn.  260; 
N.  E.  221,  where  this  question  was  Ware  v.  Owens  (1868),  42  Ala.  212, 
involved  the  court  said:  " There  is  94  Am.  Dec.  672.  See  also,  Blakes- 
nothing  to  show  that  there  was  any  lee  v.  Blakeslee  (1914),  265  111. 
conveyance  of  the  land  and  build-  48,  106  N.  E.  470;  Grant  v.  Ban- 
ings  by  them  'to  themselves  as  a  nister  (1911),  160  Cal.  774,  118  Pac. 
firm  or  that  it  was  agreed  or  un-  253. 

derstood  that  the  land  and  buildings  32  See    Collins   v.   Decker    (1879), 

should   be   regarded  as   partnership  70  Me.  23. 

property,  and  they  were  not  so  en-  33  See  Du  Bree  v.  Albert  (1882), 

tered  on  the  books.    It  is  plain  that  100   Pa.    483 ;    Henry   v.    Anderson 

the  use  of  them  for  partnership  pur-  (1881),   77   Ind.   361;    Kruschke  v. 

poses  did  not  of  itself  convert  them  Stefan   (1892),  83  Wis.  373,  53  N. 

into    partnership    assets    or    conclu-  W.  679,  Burd.  Gas.  167. 

143 


§163] 


LAW   OF  PARTNERSHIP 


§163.  Partnership  realty,  when  deemed  personal  estate. — 

For  the  purpose  of  facilitating  the  administration  and  applica- 
tion of  partnership  realty  to  partnership  purposes,  the  fiction  of 
an  equitable  conversion  into  that  form,  to  wit,  personalty,  into 
which  it  must  ultimately  be  converted  in  order  to  be  so  applied, 
has  been  established.  This  conversion  is  deemed  to  result  from 
the  devotion  of  the  land  to  the  uses  of  the  partnership,  though 
there  is  not  entire  agreement  as  to  the  extent  to  which  it  will 
be  carried.  The  English  rule  is  that  of  "out  and  out"  or  com- 
plete conversion,  and  regards  partnership  realty  as  partnership 
capital  and  as  having  in  all  respects  the  character  of  personal 
property ;  34  but  the  American  rule  is  otherwise.35  In  this  coun- 
try, unless  there  is  something  to  indicate  a  more  complete  con- 
version, as  there  may  be,86  the  partnership  realty  retains  its 


34  See  Darby  v.  Darby   (1856),  3 
Drew.  495,  Ames'   Cas.   177,    Gilm. 
Cas.    193. 

35  See  Buchan  v.  Sumner  (1847), 
2  Barb.   Ch.    (N.  Y.)    165,  47  Am. 
Dec.  305;   Collumb  v.  Bead  (1862), 
24   N.   Y.    505;    Fan-child   v.   Fair- 
child  (1876),  64  N.  Y.  471;  Darrow 
v.  Calkins  (1897),  154  N.  Y.  503,  49 
N.   E.   61,   61    Am.   St.   R,   637,  48 
L.  B.   A.   299,  Mechem's  Cas.   813, 
Gilm.    Cas.    203;    Martin   v.    Morris 
(1885),  62  Wis.  418,  22  N.  W.  525; 
Brewer  v.  Browne    (1880),  68  Ala. 
230;  Molineaux  v.  Raynolds  (1896), 
54  N.  J.  Eq.  559,  35  Atl.  536,  Burd. 
Cas.  169,  Gilm.  Cas.  215;  Huston  v. 
Neil    (1873),    41    Ind.    504,    Gilm. 
Cas.  200. 

36  Thus,  it  is  sometimes  said  that 
an  agreement  to  deal  in  land  as  the 
partnership  business,  of  itself  works 
an  out  and  out  conversion  in  equity. 
See  Rovelsky  v.  Brown    (1891),  92 
Ala.  522,  9  So.  182,  25  Am.  St.  E. 
83,  Mechem's  Cas.   832;    Nichols  v. 
Burcham     (1913),    177    Mich.    601, 
143    N.    W.    647;    Frost    v.    Wolf 
(1890),  77  Tex.  455,  14  S.  W.  440, 


19  Am.  St.  E.  761 ;  Ludlow  v.  Coop- 
er (1854),  4  Ohio  St.  1;  Buckley  v. 
Doig  (1907),  188  N.  Y.  238,  80  N. 
E.  913. 

Contra:  Carter  v.  Flexner  (1891), 
92  Ky.  400,  17  S.  W.  851,  13  Ky. 
L.  E.  608. 

So  there  is  held  to  be  a  conver- 
sion where  the  contract  between 
partners  dealing  in  real  estate  pro- 
vided that  the  title  should  be  taken, 
held  and  conveyed  by  a  trustee: 
Mallory  v.  Eussell  (1887),  71  Iowa 
63,  32  N.  W.  102,  60  Am.  E«p.  776. 
See  also  Greenwood  v.  Marvin 
(1888),  111  N.  Y.  423,  19  N.  E. 
228.  Where  one  of  two  partners 
owning  firm  real  estate  made  a 
conveyance  to  his  copartner  of  all 
his  interest  in  the  land  in  trust  to 
manage  the  same  as  partnership 
property  and  upon  termination  of 
the  partnership  and  closing  up  of 
its  affairs  to  pay  over  to  the  grantor 
whatever  should  be  coming  to  him, 
this  was  held  to  constitute  an  out 
and  out  conversion  into  personalty 
as  between  the  partners  and  their 
representatives.  Darrow  v.  Calkina 


144 


SOME   INCIDENTS  OF  PARTNERSHIP 


[§164 


character  as  such  for  most  purposes,  though  the  firm  may  deal 
with  it,  and  equity  will  regard  it,  as  personalty  for  the  purpose 
of  paying  the  debts  and  settling  the  partnership  affairs,  to  the 
exclusion  of  the  heirs,  widows  or  creditors  of  the  individual 
partners.37  As  soon  as  that  purpose  is  accomplished,  however, 
the  remaining  realty,  it  is.  said,  resumes  its  character  as  such.88 
It  therefore  descends  to  the  heir  of  a  deceased  partner,  and  the 
widow  of  a  deceased,  partner,  as  will  be  seen,  is  usually  held 
to  be  entitled  to  dower  in  it.39 

§  164.  It  must  be  borne  in  mind  that  this  theory  of  con- 
version is  only  a  fiction,  and  it,  of  course,  applies  to  equitable 
transfers  alone.  At  law,  partnership  realty  is  regarded  as  land, 
and  the  legal  title  to  the  land  devolves  and  can  be  conveyed 


(1897),  154  N.  Y.  503,  49  N.  E.  61, 
61  Am.  St.  K.  637,  48  L.  B.  A.  299, 
Mechem's  Gas.  813,  Gilm.  Gas.  203. 

See  also,  Davis  v.  Smith  (1887), 
82  Ala.  198,  2  So.  897,  Mechem's 
Gas.  821,  Burd.  Gas.  182. 

37  Thus,  in  Woodward-Holmes  Co. 
v.  Nudd  (1894),  58  Minn.  236,  59 
N.  W.  1010,  27  L.  E.  A.  340,  Me- 
chem's Gas.  810,  Burd.  Gas.  179,  it 
is  said:  "During  the  continuance 
of  the  partnership  the  partners  can 
convey  or  mortgage  it,  in  the  course 
of  their  business,  whenever  they  see 
fit,  without  their  wives  joining  in 
the  conveyance  or  mortgage,  and  the 
wives  would  have  no  dower  or  other 
interest  in  it.  This  is  one  of  the 
very  objects  of  treating  partner- 
ship real  estate  as  personal  prop- 
erty; for  otherwise  the  business  of 
the  firm  might  be  stopped,  and  the 
partners  unable  to  realize  on  the 
assets  of  the  firm,  by  reason  of  the 
wife  of  one  of  them  refusing  to  join 
in  the  conveyance  or  mortgage. 
They  hare  the  same  power  of  dispo- 
sition over  it  for  the  purposes  of  a 
\  dissolution  of  the  partnership,  the 
Mech.  Part,— 10 


payment  of  -its  debts,  and  the  dis- 
tribution or  division  of  the  capital 
among  themselves;  for  until  that  is 
done  the  property  has  not  fulfilled 
its  function  as  personalty,  or  ceased 
to  be  partnership  property."  So  in 
Eovelsky  v.  Brown  (1891),  92  Ala. 
522,  9  So.  182,  25  Am.  St.  B.  83, 
Mechem's  Gas.  832,  it  is  held  that 
one  member  of  a  firm,  engaged  in 
the  business  of  buying  and  selling 
real  estate,  can  bind  the  firm  by  a 
contract  in  the  firm  name  for  the 
sale  of  partnership  land,  and  that 
such  contract  will  be  specifically  en- 
forced against  all  the  partners. 

As  to  the  effect  of  a  decree  of  a 
court  of  one  State  upon  lands  situ- 
ated in  another  State,  entered  in  an 
action  to  settle  the  partnership  af- 
fairs, see  Dunlap  v.  Byers  (1896), 
110  Mich.  109,  67  N.  W.  1067. 

38  See  Brewer  v.  Browne   (1880), 
68  Ala.  210;  Strong  v.  Lord  (1883), 
107    111.    25;     Shearer    v.    Shearer 
(1867),  98  Mass.   107,  Ames'  Gas. 
185. 

39  See  post,  §§165,  166. 


145 


§  165]  LAW  OP  PARTNERSHIP 

only  in  the  manner  and  by  the  methods  appropriate  to  such 
property.40  This  legal  title,  however,  will  be  held  in  subordina- 
tion to  the  rights  properly  acquired  in  the  dealings  with  the  land 
as  personalty. 

So,  upon  the  death  of  a  partner  in  whom  a  legal  title.  IQ_  firm 
realty  was  vested,  the  legal  title  descends  to  his  heirs,  though 
the  heirs  hold  it  in  trust  for  partnership  purposes,  and  can  be 
compelled  to  transfer  the  legal  title  to  those  who  have  properly 
acquired  the  equitable  title.*1 

§  165.  Dower  in  partnership  land. — The  question  whether 
the  widow  of  a  partner  is  entitled  to  dower  in  lands  belonging 
to  the  partnership  at  the  time  of  his  death,  has  been  a  prolific 
source  of  difficulty.  Where  the  land  was  owned  by  her  husband, 
and  she  had  acquired  an  inchoate  right  of  dower  in  it,  before 
the  formation  of  the  partnership,  her  right  is,  of  course,  ordi- 
narily unquestionable  unless  it  has  been  legally  barred  when 
the  land  was  afterwards  conveyed  to  the  partnership.42  But 
where  the  land  was  acquired  as  partnership  land  during  the 
partnership,  other  considerations  apply.  If  when  the  land  was 
so  acquired,  the  title  was  taken  in  the  name  of  the  other  partner 
only  or  of  a  third  person,  so  that  no  legal  title  to  it  ever  vested 
in  her  husband,  she  would  not  be  entitled  to  dower,43  unless, 

40  ' '  Every  such  conversion,  wheth-  in  whose  name  a  legal  title  stands 

er  express  or  implied,   complete  or  may  properly  describe  himself  as  a 

partial,   is  equitable   only,   and   the  "freeholder"  or  land  owner:    Tat- 

property   can   only   be   conveyed   as  tersall   v.    Nevels    (1906),    77   Neb. 

real    estate":    Davis    v.    Christian  843,  110  N.  W.  708. 

(1859),    15    Oratt.    (Va.)     11,    36.  41  See    Shanks    v.    Klein    (1881), 

Same:    Espy   v.    Comer    (1884),   76  104  U.   S.   18,  26  L.  Ed.  635,  Me- 

Ala.  501;  Duncan  v.  Duncan  (1892),  chem's  Gas.   211;    Hanway  v.  Bob- 

93  Ky.  37,  18  S.  W.  1022,  13  Ky.  ertshaw    (1874),  49   Miss.  758. 

L.    E.    917,    40    Am.    St.    E.    159.  42 See  Grissom  v.  Moore    (1885), 

"They  [the  partners]  must  observe  106  Ind.  296,  6  N.  E.  629,  55  Am. 

all  the  solemnities  and  convey  in  the  Eep.  742;  Eatcliffe  v.- Mason  (1891), 

mode  recognized  by  law  for  the  trans-  92  Ky.  190,  17  S.  W.  438,  13  Ky. 

fer  or  conveyance  of  real  estate":  L.  B.  551;  Chase  v.  Angell  (1906), 

Euffner  v.  McConnel  (1855),  17  111.  148  Mich.   1,   108  N.  W.  1105,  118 

212,    63    Am.    Dec.    362,    Mechem's  Am.  St.  E.  568. 

Cas.  829.  43  See  Mallory  v.  Eussell   (1887), 

In  a  collateral  matter,  a  partner  71  Iowa  63,  32  *N.  W.  102,  60  Am. 

146 


SOME  INCIDENTS  OF  PARTNERSHIP  [§  165 

under  the  law  of  the  State,  she  was  dowable  in  equitable  estates.44 
If  a  legal  title  were  vested  in  her  husband,  it  was,  by  the  hypoth- 
esis, acquired  as  partnership  land  for  partnership  purposes. 
The  demands  of  such  purposes  constitute  a  charge  upon  the  land 
which  is  prior  to  any  interest  therein  which  the  individual  part- 
ner or  anyone  claiming  through  him  can  assert.  In  its  effect 
upon  dower,  such  a  charge  is  somewhat  like  a  mortgage  existing 
upon  land  when  it  was  acquired  and  subject  to  which  the  title 
was  taken ;  such  a  mortgage  would  take  precedence  of  any  dower 
right  asserted  by  the  widow  of  the  purchaser,  and  the  part- 
nership demands  are  entitled  to  a  similar  priority.45  When, 
however,  such  partnership  purposes  are  satisfied,  any  land  re- 
maining would  be  a  proper  subject  of  dower,46  unless  there  had 
been  an  "out  and  out"  conversion  into  personalty.  What  are 
the  partnership  purposes  which  are  thus  paramount?  They  in- 
clude, in  the  case  of  a  partnership  to  deal  in  land,  the  sale  of 
the  land  in  the  ordinary  course  of  the  business,  and,  in  any  case, 
the  sale,  mortgaging  or  otherwise  disposing  of  the  land  to  pay 
the  debts  of  the  firm  to  third  persons  or  to  satisfy  the  claims 
of  the  individual  partners  against  the  firm  arising  in  the  course 
of  the  firm 's  business.  As  against  such  claims,  there  is  no  right 
of  dower  and  the  wives  of  the  partners  need  not  join  in  a  convey- 
ance of  the  land.47 

Sep.  776  (no  dower  in  lands  held  partnership  and  each  conveys  to  the 
by  trustees  for  the  firm).  other  an  undivided  one-half  of  his 
44 See  Davis  v.  Green  (1890),  102  land,  his  wife  joining  in  the  con- 
Mo.  170,  14  S.  W.  876,  11  L.  E.  A.  veyance,  in  order  to  vest  the  title 
90.  in  the  parties  as  partners,  the  wife 

45  See  Paige  v.  Paige  (1887),  71  of  each  is  entitled  to  dower  after  the 
Iowa  318,  32  N.   W.   360,  60   Am.  firm  purposes  are  satisfied:   Free  v. 
Eep.     799,     Mechem's     Gas.     217;  Beatley    (1893),   95   Mich.   426,   54 
Woodward-Holmes      Co.      v.      Nudd  N.  W.  910. 

(1894),    58    Minn.    236,    59    N.    W.  47 See    Woodward-Holmes    Co.    v. 

1010,  49  Am.  St.  E.  503,  27  L.  E.  Nudd,  supra.     See,  also,  Andrews  v. 

A.   340,   Mechem's   Cas.   810,   Burd.  Brown  (1852),  21  Ala.  437,  56  Am. 

Cas.  179.  Dec.  252,  Gilm.  Cas.  267;  Huston  v. 

46  See  Bennett  v.  Bennett  (1910),  Neil  (1873),  41  Ind.  504,  Gilm.  Cas. 
137  Ky.  17,  121  S.  W.  495,  22  Am.  200;  Dyer  v.  Clark  (1843),  5  Mete. 
&  Eng.  Ann.  Cas.  407,  and  note.  (Mass.)  562,  39  Am.  Dec.  697,  Gilm. 

Where  two  land  owners  enter  into      Cas.    196. 

147 


§  166]  LAW   OP   PARTNERSHIP 

§  166.  Whether  such  partnership  purposes,  in  the 

United  States,  include  the  restoration  of  the  partnership  capital 
and  profits  in  cash,  seems  to  be  more  or  less  in  dispute.  Where 
the  partnership  was  one  to  deal  in  land — and  therefore  resulting 
in  an  "  out  and  out ' '  conversion,  such  a  restoration  is  a  partner- 
ship purpose.  But  in  other  cases  than  those  of  "out  and  out" 
conversion,  the  prevailing  rule  seems  to  be  to  regard  what  is 
left,  after  debts  and  equities  are  adjusted,  as  land,  and  then, 
even  if  it  became  necessary  to  sell  all  the  land  in  order  to  get 
out  enough  to  satisfy  those  charges,  the  proceeds  of  the  residue 
would  be  regarded  as  land,  in  which  the  widow  might  have 
dower,48  though  there  would  be  no  dower  in  such  a  case  as  against 
the  purchaser. 

Usually  the  widow  will  be  found  to  be  contending  that  a  sur- 
plus is  land  in  order  that  she  may  get  dower  in  it  as  such ;  but 
occasionally,  where  her  distributive  share  in  personalty  under 
the  statutes  would  exceed  the  value  of  her  dower,  she  will  be 
found  insisting  that  the  surplus  is  personalty.  The  same  con- 
ditions which  would  support  her  claim  in  the  former  case  would 
defeat  it  in  the  latter,  and  vice  versa*9 

The  Uniform  Partnership  Act  excludes  dower.  It  provides 
that  "a  partner's  right  in  specific  partnership  property  is  not 
subject  to  dower,  courtesy,  or  allowances  to  widows,  heirs  or 
next  of  kin."60 

48  See  Buchan  v.  Sumner   (1847),  inchoate  rights  of  dower  were  here 

2  Barb.    (N.  Y.)    Ch.   165,  47  Am.  involved,  as  no  partner  had  died. 

Dec.   305;   Foster's  Appeal   (1873),  In  Leaf  s  Appeal  (1884),  105  Pa. 

74    Pa.    391,    15    Am.    Rep.    553;  505,  although  one  partner  had  died 

Shearer  v.  Shearer  (1867),  98  Mass.  the    partnership    was    not    dissolved 

107,    Ames'    Gas.    185;     Lenow    v.  but  was  going  on  with  all  accounts 

Tones  (1886),  48  Ark.  557,  4  S.  W.  and  equities   yet   unsettled. 

56;    Carter    v.    Flexner    (1891),    92  The     Uniform     Partnership     Act, 

Ky.  400,  17  S.  W.  851,  13  Ky.  L.  B.  sec.  38,  provides  for  a  final  distri- 

608.  bution    "in    cash,"    unless    other- 

In  Woodward-Holmes  Co.  v.  Nudd  wise   agreed. 

(1894),    58    Minn.    236,    59   N.   W.  49  See  Shearer  v.  Shearer  (1867), 

1010,  49  Am.  St.  R.  503,  27  L.  R.  A.  98  Mass.  107,  Ames'  Gas.  185;  Le- 

340,  Meehem's  Gas.  810,  Burd.  Gas.  now  v.  Fones   (1886),  48  Ark.  557, 

]79,  the  court  speaks  of  the  restora-  4  S.  W.  56;  Hughes  v.  Allen  (1894), 

tion  and  division  of  the  capital  as  66  Vt.  95,  28  Atl.  882. 

one  of  the  purposes  which  will  pre-  50  Sec.  25,  subd.  e. 
cede  re-conversion  to  realty.     Only 

148 


SOME  INCIDENTS  OF  PARTNERSHIP  [§§  167,  168 

§  167.  Bona  fide  purchaser  from  partner  having  legal  title. — 

Partnership  lands,  therefore,  when  found  to  be  such,  may  be  sub- 
jected to  the  claims  of  the  partnership  creditors,  and  the  latter 
take  precedence  over  the  creditors  of  an  individual  partner  in 
whose  name  the  legal  title  stands,  and  over  a  transfer  by  such 
partner  of  the  legal  title  to  any  one  not  a  bona  fide  purchaser. 
But  a  bona  fide  purchaser  or  mortgagee  of  partnership  lands,  in 
ignorance  that  they  were  such,  from  the  partner  having  the  legal 
title  of  record,  will  be  protected  as  against  both  the  other  part- 
ners and  creditors.61 

§168. Notice  from  possession  by  the  firm. — Whether, 

in  such  a  case,  the  fact  that  the  firm  is  in  possession  of  the  land 
is  notice  of  its  rights,  is  a  question  upon  which  there  seems  to 
be  some  difference  in  opinion.  Where  the  possession  does  not 
appear  to  be  in  accord  with  the  state  of  the  title,  e.  g.,  where 
the  title  seems  to  be  in  a  third  person  or  in  less  than  the  entire 
number  of  partners,  there  the  possession  seems  to  give  notice. 
Where,  however,  the  possession  and  the  title  appear  to  be  in 
accord,  as  where  all  of  the  partners  have  the  title  apparently 
as  tenants  in  common,  it  has  been  held  in  some  cases  that  there 
is  no  notice.52  On  the  other  hand,  it  is  said  in  an  English  case 
that  even  in  such  a  case  the  possession  of  the  firm  as  such, — as 
where  the  land  is  the  seat  of  the  firm's  business, — is  notice  of 
some  arrangement  with  the  apparent  owners  and  therefore  is 
notice  of  whatever  kind  of  an  arrangement  it  may  turn  out  to 
be,  as,  for  example,  that  the  land  is  held  as  partnership  prop- 
erty.63 

51  See    Norwalk    Nat.    Bank    v.  Mechem's    Gas.    204;     Goldthwaite 

Sawyer    (1882),   38   Ohio   St.    339;  v.  Janney  (1894),  102  Ala.  431,  15 

McNeil    v.    Congregational    Society  So.  560,  28  L.  K.  A.  161,  Mechem's 

(1884),  66  Gal.  105;   Seeley  v.  Mi-  Gas.  804,  Burd.  Gas.  176. 

chell    (1887),  85  Ky.  508,  4  S.  W.  52 See       Hammond      v.      Paxton 

190,  9  Ky.  L.  E.  86;  Tarbell  v.  West  (1885),  58  Mich.  393,  25  N.  W.  321; 

(1881),   86   N.   Y.    280;    Kepler   v.  Kobinson    Bank    v.    Miller    (1894), 

Savings  &  Loan  Co.  (1882),  101  Pa.  153  111.  244,  38  N.  E.  1078,  46  Am. 

602.       See,     also,     National    Union  St.  E.   883,  27  L.   E.  A.  449,  Me- 

Bank  v.  National  Mechanics'  Bank  chem's  Gas.  195,  Burd.  Gas.  165. 

(1895),   80    Md.   371,   30    Atl.   913,  53  See  Cavender  v.  Balteel  (1873), 

27  E.  E.  A.  449,  45  Am.  St.  E.  350,  L.  E.  9  Ch.  App.  79.     To  same  ef- 

149 


§  169]  LAW  OF  PARTNERSHIP 

§  169.  Interest  of  surviving  partner  in  firm  realty. — Upon 
the  dissolution  of  the  partnership  by  death,  the  entire  legal 
title  to  all  the  partnership  personalty  vests,  as  will  be  seen  here- 
after,64 in  the  survivor.  With  respect  of  the  partnership  realty, 
however,  a  somewhat  different  rule  prevails.  The  real  estate, 
though  treated  as  personalty  in  the  United  States  for  many  pur- 
poses, retains  its  character  as  realty  so  far  as  the  exigencies 
of  the  partnership  affairs  will  permit.  The  legal  title  to  it — 
unless  it  had  been  vested  for  the  firm  in  the  name  of  one  part- 
ner only  who  chances  to  be  the  survivor — descends,  as  has  been 
seen,55  to  the  heirs  but  subject  to  the  partnership  needs;  the 
lien  of  the  survivor  still  exists,  and  an  equitable  title  vests  in 
the  surviving  partner  for  the  purpose  of  paying  the  firm  debts 
and  settling  up  the  partnership  affairs  in  substantially  the  same 
manner  that  the  legal  title  to  the  personal  assets  vests  in  him. 
As  such  survivor  he  may,  therefore,  convey,  when  necessary,  the 
equitable  title  to  part  or  all  of  the  partnership  realty,  and  the 
court  will  then  require  the  heirs  or  other  holders  of  the  legal 
title  to  convey  that  legal  title  to  the  person  who  has  purchased 
the  equitable  title  from  the  surviving  partner.56  If  he  happens 
to  be  vested  with  the  entire  legal  title,  as  for  example  where 
the  land  was  originally  conveyed  to  him  alone  for  the  firm,  or 
where  during  the  partnership  the  partner  since  deceased  con- 
veyed the  legal  title  to  the  one  who  now  survives  in  trust,57 
he  may  convey  the  entire  legal  title.  He  may  do  so  also  where 
by  the  provisions  of  the  deceased  partner's  will  a  testamentary 

feet:  Bergeron  v.  Eichardott  (1882),  1076,  7  L.  E.  A.  481;  Tillinghast  v. 

55  Wis.  129,  12  N.  W.  384;  Duryea  Champlin    (1856),   4  B.   I.   173,   67 

v.  Burt   (1865),  28  Gal.  569;  Chur-  Am.   Dee.   510;    Buffum   v.   Buffum 

dull   v.   Proctor    (1883),    31    Minn.  (1861),  49   Me.   108,   77   Am.  Dec. 

129,  16  N.  W.  694.  249;  Delmonieo  v.  Guillaume  (1845), 

54  See  post,  §§  402,  403.  2  Sand.  Ch.  (N.  Y.)  366,  Burd.  Gas. 

55  See  ante,  §  163.  161;    Hartnett    v.    Stilwell    (1904), 

56  See    Shanks    v.    Klein    (1881),  121  Ga.  386,  49  S.  E.  276,  104  Am. 
104  U.   S.  18,  26  L.  Ed.  635,  Me-  St.  E.  151. 

chem's    Gas.    211;    Dyer    v.    Clark  57  See  Darrow  v.  Calkins   (1897), 

(1843),  5  Mete.  (Mass.)  562,  39  Am.  154   N.    Y.    503,    49    N.   E.    61,    61 

Dec.  697,  Ames'  Gas.  251,  Gilm.  Gas.  Am.   St.  E.   637,  48   L.  E.  A.   299, 

196;  Walling  v.  Burgess  (1889),  122  Mechem's  Gas.  813,  Gilm.  Gas.  203. 
Ind.   299,  22  N.  E.  419,  23   N.  E. 

150 


SOME  INCIDENTS  OF  PARTNERSHIP  [§  169 

power  of  sale  has  been  vested  in  him ; 58  and  also,  of  course, 
where  after  the  death  the  heirs  of  the  deceased  partner  give 
him  a  power  of  attorney  to  convey  the  legal  title  vested  in  them.69 

58  See  Davis  v.  Smith  (1887),  82  69  See  Southern  Cotton  Oil  Co.  v. 
Ala.  198,  2  So.  897,  Mechem's  Cas.  Henshaw  (1889),  89  Ala.  448,  7  So. 
821,  Burd.  Cas.  182.  760. 


151 


CHAPTER  VII. 


OF  THE  EIGHTS  AND  DUTIES  OF  PAETNEBS   TOWAEDS  EACH 

OTHEE. 


i  170.  Duty  to  exercise  good  faith. 

171.  Duty    to    devote    himself    to 

advancement  of  firm's  in- 
terests. 

172.  Duty  not  to   carry   on   other 

business  to  prejudice  of 
firm. 

173.  Duty    to    exercise    care    and 

skill. 

174.  Duty  to  conform  to  partner- 

ship agreements. 

175.  Duty  of  partners  to  keep  ac- 

counts— Eight  of  inspec- 
tion. 

176.  Duty    to    consult    with    each 

other. 

177.  Eight     of    each     partner    to 

share  in  management, 
knowledge  and  eentrol  of 
the  business. 

178.  Eight    of    partner    to    extra 

compensation. 

179.  May    be    agreement    to 

pay  it. 


180.  Liability  of  partner   for  not 

performing  agreed   service. 

181.  Partner's  right  to  return  of 

advances. 

182,183.  Eight  of  partner  to  in- 
terest on  money  advanced 
— On  capital. 

184.  Eight    of    partners    to    have 

partnership     property     ap- 
plied to  partnership  debts. 

185.  Partner  may  not   apply 

partnership  property  to  his 
own  uses. 

186.  Claims     of     partnership 

creditors    based    on    rights 
of  partners. 

187.  Partner's   right    to    contribu- 

tion from  co-partners. 

188.  On  illegal  transactions. 

189.  Upon   what  basis  deter- 
mined. 

190.  How  enforced. 

191.  Eight    of    other    partners    to 

indemnity  for  losses  caused 
by  a  partner's  misconduct. 


§  170.  Duty  to  exercise  good  faith. — The  relation  of  partners 
to  each  other  is  one  of  great  confidence  and  trust,  and  the  law 
demands  from  them  the  exercise  of  the  highest  integrity  and 
good  faith  toward  each  other.  Each  one  is  bound  to  use  the 
partnership  property  and  exercise  his  partnership  powers  for 
the  benefit  of  the  firm  and  not  for  himself  alone.  Profits  made 
in  the  course  of  the  partnership  belong  to  the  firm,  and  one 
partner  will  not  be  permitted  to  make  gain  for  himself  at  the 
expense  of  the  firm.  Secret  commissions  made  by  one  partner 

152 


RIGHTS  AND   DUTIES  OF  PARTNERS 


[§170 


upon  partnership  dealings  must  be  accounted  for  to  the  firm, 
and  if  one  partner  takes  advantage  of  his  position  to  acquire  for 
himself  that  which  it  was  his  duty  to  acquire  for  the  firm,  he 
will  be  required  to  transfer  it  to  the  firm.  So  one  partner  will 
not  be  permitted,  either  directly  or  indirectly,  to  buy  of  or  for 
himself  or  to  sell  to  or  for  himself  on  the  partnership  account, 
without  the  knowledge  and  consent  of  the  other  partners ;  and  in 
their  dealings  with  each  other,  in  relation  to  partnership  matters, 
each  is  required  to  make  a  full  disclosure  of  all  facts  within  his 
knowledge  affecting  the  transaction.  This  duty  of  good  faith  is 
intensified  when  one  partner  is  conducting  the  business  alone 
as  managing  partner.1 


ISee  Brooks  v.  Martin  (1863),  2 
Wall.  (U.  S.)  70,  and  Kimberley  v. 
Arms  (1888),  129  U.  S.  512,  9  S.  Ct. 
355,  32  L.  Ed.  764,  as  to  the  duties 
of  a  managing  partner.  See,  also, 
Trego  v.  Hunt  (1896),  App.  Gas.  7, 
Mechem's  Gas.  247,  Burd.  Gas.  602. 

See  Hodge  v.  Twitchell  (1885),  33 
Minn.  389,  23  N.  W.  547,  Mechem's 
Gas.  862,  and  Newell  v.  Cochran 
(1889),  41  Minn.  374,  43  N.  W.  84; 
Bloom  v.  Lofgren  (1896),  64  Minn. 
1,  65  N.  W.  960,  Burd.  Gas.  501, 
as  to  secret  commissions  made  by 
one  partner;  Caldwell  v.  Davis 
(1887),  10  Colo.  481,  15  Pac.  696,  3 
Am.  St.  E.  599;  Barnes  v.  Clark 
(1918),  —  S.  Dak.  — ,  169  N.  W. 
527;  Butler  v.  Prentiss  (1899),  158 
N.  Y.  49,  52  N.  E.  652;  Harlow  v. 
La  Brum  (1897),  151  N.  Y.  278,  45 
N.  E.  859,  Burd.  Gas.  502,  as 
to  the  duty  to  make  full  disclosure 
in  dealings  with  each  other;  John- 
son's Appeal  (1886),  115  Pa.  St. 
129,  2  Am.  St.  B.  539,  and  Mitch- 
ell v.  Eeed  (1874),  61  N.  Y. 
123,  19  Am.  Sep.  252,  Mechem's 
Gas.  864,  Gilm.  Gas.  419,  that  if  one 
partner  takes  a  renewal  in  his  own 
name  of  an  existing  lease  to  the 


firm,  it  inures  to  the  benefit  of  the 
firm.  This  seems  to  be  true  even 
though  there  is  to  be  a  dissolution 
of  the  firm,  because  the  chance  of 
renewal  is  a  firm  asset.  See  also 
Knapp  v.  Eeed  (1911),  88  Neb. 
754,  130  N.  W.  430,  32  L.  E.  A. 
(N.-  S.)  869;  Johnson's  Appeal 
(1886),  115  Pa.  129,  8  Atl.  36,  2 
Am.  St.  E.  539;  Deutschman  v. 
Dwyer  (1916),  223  Mass.  261,  111 
N.  E.  877.  Benewal  of  contract: 
Williamson  v.  Monroe  (1900),  101 
Fed.  322 ;  National  Wire  Bound  Box 
Co.  v.  Healy  (1911),  110  C.  C.  A. 
613,  189  Ted.  49.  Same  principle: 
Pike's  Peak  Co.  v.  Pfuntner  (1909), 
158  Mich.  412,  123  N.  W.  19.  See, 
also,  to  the  effect  that  one  partner 
who  buys  up  a  claim  against  the 
firm  at  a  discount  must  give  the 
firm  the  benefit:  Easton  v.  Strother 
(1881),  57  Iowa  506;  that  one  who 
buys  in  property  belonging  to  the 
firm,  as  upon  a  sale  on  execution, 
must  hold  for  the  firm:  Eailsback  v. 
Lovejoy  (1886),  116  111.  442,  6  N. 
E.  504;  Eoby  v.  Colehour  (1890), 
135  111.  300,  25  N.  E.  777;  that 
purchase  of  firm  property  through 
a  confederate  will  be  set  aside: 


153 


§171] 


LAW   OF   PARTNERSHIP 


§171.  Duty  to  devote  himself  to  advancement  of  firm's  in- 
terests.— In  a  recent  case  wherein  there  was,  in  fact,  an  ex- 
press agreement  that  each  should  reasonably  devote  his  time 
and  attention  to  the  partnership  affairs,  the  court  said  that 
this  fact  did  not  materially  alter  the  situation,  ' '  for  undoubtedly 
in  the  absence  of  express  agreement  to  the  contrary  a  partner 
is  impliedly  bound  thus  reasonably  to  devote  himself  to  the  ad- 
vancement of  the  co-partnership  of  which  he  has  become  a  mem- 
ber."2 Persistent  failure  to  do  so  would  usually  constitute  a 
good  reason  for  dissolving  the  partnership;  it  would  usually 
furnish  a  ground  for  the  recovery  of  damages;  but,  as  will  be 
seen  in  the  following  section,  it  would  furnish  no  ground  to 
claim  an  accounting  for  the  profits  which  the  recreant  partner 
made  in  outside  ventures  while  he  was  neglecting  the  partner- 
ship business,  unless  those  ventures  were  such  as  ought  to  have 
been  undertaken  for  the  partnership  because  they  were  within 
the  scope  of  its  business. 


Winstanley  v.  Gleyre  (1893),  146 
111.  27,  34  N.  E.  628;  that  insurance 
of  firm  property,  taken  in  the  name 
of  one  partner,  inures  to  the  firm: 
Tebbetts  v.  Dearborn  (1883),  74 
Me.  392,  Mechem's  Gas.  871;  that 
one  partner  may  not  apply  firm 
property  to  his  own  uses:  Morrison 
v.  Blodgett  (1836),  8  N.  H.  238, 
29  Am.  Dec.  653;  that  one  partner 
may  not  through  a  third  person  se- 
cretly purchase  firm  assets  sold  on 
dissolution:  Jones  v.  Dexter  (1881), 
130  Mass.  380,  39  Am.  Eep.  459, 
Mechem's  Gas.  873,  and  note; 
whether  one  partner  may  avail  him- 
self of  information  acquired  as  a 
partner  to  aid  him  in  carrying  on 
another  business  in  competition  with 
the  firm:  Aas  v.  Benham  (1891),  2 
Ch.  244;  Latta  v.  Kilbourn  (1893), 
150  U.  S.  524,  14  S.  Ct.  201,  37  L. 
ed.  1169,  Mechem's  Gas.  260,  Burd. 
Cas.  503,  Gilm.  Gas.  425. 


Products  of  partnership  activity 
inure  to  the  partnership:  Whitney 
v.  Dewey  (1907),  86  C.  C.  A.  21, 
158  Fed.  385;  Jennings  v.  Eickard 
(1887),  10  Colo.  395,  15  Pac.  677, 
Gilm.  Cas.  421;  Hurst  v.  Brennen 
(1913),  239  Pa.  216,  86  Atl.  778,  34 
Ann.  Cas.  428;  Burton  v.  Wookey 
(1822),  6  Madd.  367,  Gilm.  Cas. 
418. 

But  defendant  was  not  charged  as 
a  trustee  where,  after  the  termina- 
tion of  the  partnership,  he  bought 
for  himself  the  property  which  the 
partnership  had  been  created  to  sell 
to  others  at  a  profit:  Kayser  v. 
Maugham  (1885),  8  Colo.  232,  6 
Pac.  803. 

2  Barclay  v.  Barrie  (1913),  209 
N.  Y.  40,  102  N.  E.  602,  47  L.  B.  A. 
(N.  S.)  839,  29  Ann.  Cas.  1143. 


154 


RIGHTS   AND   DUTIES  OF   PARTNERS  [§  172 

§  172.  Duty  not  to  carry  on  other  business  to  prejudice  of 
firm. — Express  stipulations  in  the  partnership  articles  respect- 
ing the  right  of  all  or  any  of  the  partners  to  engage  in  ottyer 
business  are  common  and  often  desirable.  The  partners  may 
agree  that  a  certain  partner  shall  not,  or  that  no  partner  shall, 
engage  or  be  interested  in  any  other  business.  Equally,  they 
may  agree  in  their  articles  or  otherwise  that  one  or  more  partners 
may  carry  on  other  business,  or  be  relieved  in  whole  or  in  part 
from  giving  their  time  and  efforts  to  the  firm  business ;  but  in 
the  absence  of  such  an  agreement,  a  partner  has  no  right  to. 
give  his  time,  skill  or  efforts  to  another  business  or  firm  to  the 
prejudice  of  his  partners.  If  without  such  consent  he  carries 
on  the  same  business  as  that  of  the  firm  and  in  competition 
with  it,  and  thus  makes  profits  which  ought  to  have  enured  to 
the  firm,  he  may  be  compelled  to  account  to  the  firm  for  the 
profits  which  he  makes,3  but  he  will  not  be  compelled  to  account 
for  the  profits  if  the  business  is  a  different  and  non-competing 
one.4  In  the  latter  case,  an  action  for  damages  would  ordinarily 
be  the  legal  remedy.5  The  violation  of  express  covenants  may 
also  be  enjoined.6 

3  See  Goldsmith  v.  Eiehold  (1891),  more   (1883),  134  Mass.  330,  Burd. 
94  Ala.  116,  10  So.  80,  33  Am.  St.  Cas.  515;  National  Wire  Bound  Box 
E.  97;  Todd  v.  Eafferty  (1878),  30  Co.  v.  Healy   (1911),  110  C.  C.  A. 
N.   J.   Eq.   254;    Holmes  v.  Darling  613,  189  Fed.  49. 

(1913),  213  Mass.  303,  100  N.  E.  5  Thus  in  Dean  v.  MacDowell 
611;  Hurst  v.  Brennen  (1913),  239  (1877),  8  Ch.  Div.  345,  where  there- 
Pa.  216,  86  Atl.  778,  34  Ann.  Cas.  was  an  express  agreement  that 
428;  Wiggins  v.  Markham  (1906),  neither  partner  would  engage  in 
131  Iowa  102,  108  N.  W.  113.  other  business,  and  one  partner  did 

4  See   Aas  v.   Benham    (1891),   2  engage  in  other  business  of  a  differ- 
Ch.  244;  Lat'ta  v.  Kilbourn  (1893),  ent  and  non-competing  sort,  it  was 
150  U.  S.  524,  14  S.  Ct.  201,  37  L.  said  that  for  this  breach  of  contract 
ed.  1169,  Meehem's  Cas.  260,  Burd.  there  might  be  a  dissolution  or  in 
Cas.  503,  Gilm.  Cas.  425;   Metcalfe  some  cases  an  injunction  or  an  ac- 
v.   Bradshaw    (1893),    145   111.   124,  tion  for  damages,  but  not  a  bill  in 
33  N.  E.  1116,  36  Am.  St.  E.  478,  equity  to  compel  an  accounting  of 
Meehem's  Cas.  875.  the  profits  made  in  the  other  busi- 

As  to  the  right  of  the  partnership  ness.     It  was  conceded  that  no  ac- 

to   claim   the   benefit   of    inventions  tual  damages  could  be  proved, 

made    by    one    partner    during    the  6  See    Levine    v.    Michel    (1883), 

partnership,  see  Belcher  v.  Whitte-  35   La.   Ann.   1121. 

155 


§  173]  LAW   OF   PARTNERSHIP 

"If  a  member  enter  into  a  transaction  in  his  own  behalf, 
which  is  within  the  scope  of  the  partnership  business, ' '  said  the 
court  in  one  case,  "his  copartner  may  insist  that  it  is  a  fraud 
upon  him  and  claim  the  benefit  resulting  from  it;  yet  this  is  a 
right  which  the  partner  can  alone  assert,  and  it  is  not  avail- 
able to  third  persons  for  the  purpose  of  fixing  a  liability  upon 
the  partnership  when  such  claim  has  not  been  asserted. ' ' 7 

Clearly,  however,  the  fact  that  a  partner  makes  profits  in 
outside  transactions  is,  of  itself,  a  matter  of  no  concern  to  his 
copartners  if,  in  doing  so,  he  violated  no  duty  to  the  firm  or 
contravened  no  partnership  agreement.8  Equally,  also,  is  it  no 
breach  of  duty,  in  a  partner  who  has  not  agreed  to  do  so,  not 
to  admit  his  copartners  into,  or  furnish  them  funds  to  join, 
his  legitimate  outside  ventures. 

§173.  Duty  to  exercise  care  and  skill.— It  is  the  duty  of 
each  partner  to  his  copartners  and  he  impliedly  if  not  expressly 
agrees,  to  transact  the  business  of  the  firm  with  reasonable  care, 
skill,  diligence  and  economy';  and  if  the  firm  sustains  injury 
by  reason  of  his  failure  to  do  so,  he  must  bear  the  loss,9  though 
in  matters  of  "judgment  he  will  not  be  liable  for  a  loss  caused 
by  honest  mistake  or  error  of  judgment  not  amounting  to  wan- 
tonness or  fraud.10  The  fact  that  he  is  the  managing  partner 
increases  the  scope  of  his  duty  but  does  not  change  the  measure 
of  his  responsibility.11 

Obviously,  however,  one  partner  has  no  just  ground  for  put- 

7 Lock-wood    v.    Beckwith    (1858),  Atl.      753;      Carlin      v.      Donegan 

6  Mich.  168,  72  Am.  Dec.  69.  (1875),    15    Kans.    495;    Bohrer    v. 

8  See    Latta   v.    Kilbourn,   supra;  Drake  (1885),  33  Minn.  408,  23  N. 
Shrader     v.     Downing     (1914),     79  W.  840. 

Wash.  476,  140  Pac.  558,  52  L.  E.  A.  10  See  Charlton  v.  Sloan    (1888), 

(N.    S.)     389;     Dennis    v.    Gordon  76  Iowa  288,  41  N.  W.  303. 

(1912),  163  Gal.  427,  125  Pae.  1063;  11  Exchange     Bank     v.     Gardner 

Wheeler    v.    Sage    (1863),    1    Wall.  (1897),    104    Iowa    176,    73    N.   W. 

(68  U.  S.)  518,  17  L.  ed.  646.    But  591;    Hall  v.   Sannoner    (1884),  44 

compare  Kyle  v.  Griffin  (1915),  76  Ark.  34;  Poole  v.  Koons  (1911),  252 

W.  Va.  213,  85  S.  E.  559.  111.  49,  96  N.   E.   556;    Northen  v. 

9  See  Yetzer  v.  Applegate  (1891),  Tatum    (1909),    164    Ala.    368,    51 
83  Iowa  726,  50  N.  W.  66;  Gordon  So.  17. 

v.   Moore    (1890),   134  Pa.   486,   19 

156 


RIGHTS   AND  DUTIES  OF  PARTNERS  [§  174 

ting  a  loss  upon  his  copartner  where  the  former  was  as  much 
at  fault  as  the  latter,12  nor  may  he  properly  complain  that  his 
copartner  did  not  do  some  act  or  take  some  precaution  which 
the  complaining  partner  was  under  equal  duty  and  had  equal 
power  to  do  or  take.13 

Equally  obviously,  also,  would  the  latter  rule  be  modified 
where  the  partner  complained  of  had  the  matter  exclusively  in 
his  charge  or  was  the  managing  partner,  and  the  other  had  no 
knowledge  or  opportunity  which  would  enable  him  to  protect 
himself. 

The  measure  of  responsibility  which  the  firm  owes  to  third 
persons  for  a  partner's  acts  or  omissions  in  not  necessarily  the 
one  which  is  to  govern  that  partner's  responsibility  to  his  co- 
partners; for  it  is  entirely  obvious  that  the  firm  may  assume 
to  third  persons  a  responsibility  which  it  was  not  the  intention, 
as  between  themselves,  that  the  partner  in  question  should  as- 
sume. 

§  174.  Duty  to  conform  to  partnership  agreements. — It  is 

also  the  duty  of  each  partner  to  conform  to  all  of  the  agreements, 
regulations  and  restrictions  imposed  by  the  partnership  articles, 
and  to  confine  his  acts  within  the  scope  and  limits  fixed  for 
the  partnership  business.  If,  "by  reason  of  his  breach  of  duty 
in  these  respects,  a  loss  happens  to  his  partners,  he  must  in- 
demnify them.14 

Thus,  where  the  partners  expressly  agreed  that  no  one  of 
them  should  sign,  accept  or  indorse  negotiable  paper  except  for 

12 See  Insley  v.  Shire  (1895),  54  Mechem's  Gas.  275,  Gilm.  Gas.  438; 

Kan.  793,  39  Pac.  713,  45  Am.  St.  McCoy  v.  Crossfield  (1909),  54  Ore. 

E.  308,  Meehem's  Gas.  270.  591,  104  Pac.  423;   Looney  v.  Gill- 

13  See  Lyons  v.  Lyons  (1903),  207  enwaters     (1872),     58     Tenn.     (11 

Pa.  7,  56  Atl.  54,  99  Am.  St.  E.  779,  Heisk)    133;   Haller  v.  Willamowicz 

Meehem's    Gas.    880;     Chalmers    v.  (1861),  23  Ark.  566  (here  the  agree- 

Chalmers  (1889),  81  Gal.  81,  22  Pac.  ment  was  that  one   partner   should 

395  (Cases  wherein  the  partner  who  not  take  part  in  the  business,  and 

complained  that  the  other  had  not  caused  loss  by  doing  so), 

collected  debts,  had  equal  opportu-  Violation  may  be  waived:  Weeks 

nity  to  collect  them  himself).  v.  MeClintock  (1887),  50  Ark.  193, 

14 See  Murphy  v.   Crafts    (1858),  6  S.  W.  734. 
13  La.  Ann.  519,  71  Am.  Dec.  519, 

157 


§  175]  LAW   OF   PARTNERSHIP 

their  own  legitimate  purposes,  and  one  of  them  used  the  firm 
name  for  the  accommodation  of  the  third  person  in  ;such  a  way 
that  the  firm  was  held  liable,  the  offending  partner  was  com- 
pelled to  make  good  the  loss  to  his  partners.16  The  same  ruling 
was  made  where  the  partners  had  expressly  agreed  not  to  give 
firm  credit  to  relatives,  and  one  of  them  did  so  to  the  loss  of 
the  firm.16  And  where  one  partner  who  had  stipulated  to  render 
certain  services  for  the  firm  refused  without  reasonable  cause 
to  do  so,  it  was  held  that  he  was  answerable  to  his  partners  for 
the  value  of  the  services.17 

§  175.  Duty  of  partners  to  keep  accounts — Right  of  inspec- 
tion.— It  is  the  right  of  every  partner  to  have  true  and  proper 
accounts  kept  of  the  partnership  transactions,  and  to  have  these 
accounts,  at  all  reasonable  times,  open  to  his  inspection  at  the 
place  of  business.  The  general  duty  of  keeping  the  formal  books 
of  accounts  may,  by  the  articles  or  other  agreement,  be  devolved 
upon  one  partner,  or  upon  a  clerk;  but  even  in  such  a  case,  as 
well  as  when  there  is  no  agreement,  it  is  the  duty  of  each  part- 
ner to  make  and  keep,  or  furnish  to  the  proper  person  to  keep, 
correct  accounts  of  such  partner's  own  transactions  for  the  firm. 
Where  a  partner  fails  in  his  duty  in  this  regard,  every  reason- 
able presumption  will  be  made  against  him  upon  the  final  ac- 
counting.18 

15  Murphy  v.  Crafts,  supra.  99;  Clarke  v.  Clarke  (1919),  —  Va. 

16  McCoy  v.   Crossfield,  supra.  —,  99  S.  E.  664. 

17  Marsh's  Appeal  (1871),  69  Pa.          It   occasionally  happens   that  the 
St.  30,  8  Am.  Kep.  206.  parties   have    been    so   negligent    in 

18  See  Kelly  v.  Greenleaf  (1843),  the  keeping  of  accounts  that  no  just 
3  Story  (U.  S.  C.  C.)  105;  Webb  v.  and    reasonable    conclusion    can    be 
Fordyce    (1880),   55   Iowa   11,   Me-  reached   by   the   court.     In   such    a 
chem's  Gas.   276;    Holden  v.   Thur-  case  the  court  will  dismiss  the  bill, 
ber    (1909),   72    Atl.    (E.    I.)    720;  It  "will  not  grope  its  way  in  utter 
Hall  v.  Clagett  (1877),  48  Md.  223;  darkness,   and   undertake   to    create 
Pierce  v.  Scott  (1861),  37  Ark.  308;  and    establish    a    claim    upon    mere 
Pomeroy  v.  Benton   (1882),  77  Mo.  contingencies   or  the   preponderance 
64;   Diamond  v.  Henderson   (1879),  of    mere    possibilities    or    probabili* 
47    Wis.    172;    Knapp    v.    Edwards  ties."      Eyman    v.    Ryman    (1901), 
(1883),  57  Wis.  191,  15  N.  W.  140;  100  Va.  20,  40  S.  E.  96. 
Chandler  v.  Sherman  (1877),  16  Fla. 

158 


RIGHTS   AND   DUTIES  OP  PARTNERS  [§  176 

Here,  of  course,  as  in  other  cases,  one  partner  could  not  prop- 
erly complain  where  the  failure  to  keep  the  account  was  as 
much  his  own  fault  as  that  of  his  copartner.19  Equally,  also, 
would  the  duty  of  one  partner  be  increased  where  he  was  the 
managing  partner.20 

Formal  and  expert  bookkeeping  is  not  ordinarily  expected  of 
a  partner,  but  an  honest,  full  and  intelligible  account  of  his  trans- 
actions is  not  too  much  to  expect. 

Upon  the  general  subject  the  Uniform  Partnership  Act  pro- 
vides: "The  partnership  books  shall  be  kept,  subject  to  any 
agreement  between  the  partners,  at  the  principal  place  of  busi- 
ness of  the  partnership,  and  every  partner  shall  at  all  times 
have  access  to-  and  may  inspect  and  copy  any  of  them. ' ' 21 

§176.  Duty  to  consult  with  each  other. — As  will  be  seen 
in  the  following  section,  every  partner  has  presumptively  an 
•equal  right  and  an  equal  voice  in  the  conduct  of  the  partnership 
'affairs.  This  does  not  mean,  of  course,  that  all  of  the  partners 
must  participate  in  every  transaction,  or  even  that  all  must  con- 
sult together  before  any  one  of  them  may  do  any  act  in  the 
usual  and  ordinary  conduct  of  the  business.  The  very  creation 
of  the  partnership  results  in  a  general  agency  in  each  partner 
for  the  ordinary  course  of  the  business  and  until  revoked.  But 
with  reference  to  unusual  and  unexpected  matters  that  can  not 
fairly  be  regarded  as  covered  by  the  original  or  general  agree- 
ments, the  case  is  different.  Trifling  and  insignificant  acts, 
though  unusual,  may  be  easily  disposed  of,  but  in  every  impor- 
tant exigency  in  the  partnership  affairs,  where  one  partner  is 
about  to  act,  he  should  consult  with  his  partners  unless  the  cir- 
cumstances are  such  as  to  prevent  or  excuse  him  from  so  doing. 
So,  also,  should  he,  in  any  case  in  which  it  may  reasonably  be 
supposed  that  the  other  partner  had  special  information  which 
should  be  taken  into  account  before  the  act  was  done.  Thus, 

19  Where    a    bookkeeper    is    em-  .      20  See  McAlpine  v.  Millen  (1908), 

ployed  by  the  firm,  his  errors  are  104  Minn.  289,  116  N,  W.  583;  Gay 

not  to  be   charged   to   one  partner  v.   Householder    (1912),   71  W.  Va. 

unless  he  was  in  some  way  respon-  277,  76  S.  E.  450,  Ann.  Cas.  1914  C, 

sible  for  them.     Folsom  v.  Marietta  297;   Benedetto  v.  DiBacco   (1919), 

(1897),   23   Nev.   459,  49   Pac.   39,  —  W.  Va.  — ,  99  S.  E.  170. 

Burd.  Cas.  570.  21  Sec.   19. 

159 


§§  177,  178]  LAW  OF  PARTNERSHIP 

where  one  partner,  without  consulting  his  copartner — whose 
knowledge  of  the  subject  because  he  had  originally  handled  the 
transaction  would  have  rendered  the  purchase  unnecessary — 
bought  in  for  a  large  sum  an  apparent  but  really  unfounded 
claim  against  the  firm  real  estate,  it  was  held  that  his  act  was 
gross  negligence  and  that  he  could  not  require  his  copartner  to 
contribute  to  the  expense  of  the  purchase.22 

§  177.  Right  of  each  partner  to  share  in  management,  knowl- 
edge and  control  of  the  business. — Unless  they  have  agreed 
otherwise,  it  is  the  right  of  each  partner  to  take  an  equal  part 
in  the  transaction  of  the  firm 's  business.  Each  has  an  equal  right 
to  information  about  its  business  and  projects,  to  have  free 
access  to  its  books  and  accounts,  and  to  participate  generally  in 
the  conduct  of  its  affairs.23  ' '  Although  one  may  have  an  interest 
only  in  the  profits  and  not  in  the  capital, ' '  said  the  court  in  one 
case,24  his  right  to  participation  is  the  same  because  "his  rights 
are  involved  in  the  proper  conduct  of  the  affairs  of  the  firm,  so 
that  profits  may  be  made." 

Upon  these  subjects,  the  Uniform  Partnership  Act  provides: 
"Partners  shall  render  on  demand  true  and  full  information  of 
all  things  affecting  the  partnership  to  any  partner  or  the  legal 
representative  of  any  deceased  partner  or  partner  under  legal 
disability."26 

"All  partners  have  equal  rights  in  the  management  and  con- 
duct of  the  partnership  business. ' ' 26 

The  right  of  a  partner  to  a  voice  in  the  management  of  the 
business  does  not  usually  take  the  form  of  a  right  to  vote,  but 
it  is  that  in  substance,  and,  in  the  case  of  large  partnerships 
managed  by  elected  agents,  it  would  usually  take  that  form. 

§  178.  Right  of  partner  to  extra  compensation. — In  the  ab- 
sence of  special  agreement,  a  partner  is  not  entitled  to  com- 

22Yorks    v.     Tozer     (1894),     59.  ris  (1901),  132  Ala.  208,  31  So.  355; 

Minn.  78,  60  N.  W.  846,  28  L.  E.  Einstein    v.    Schnebly    (1898),    89' 

A.  86,  50  Am.  St.  E.  395,  Mechem's  Fed.      540;      Hartman     v.     Woehr 

Cas.  278,  Gilm.  Cas.  440.  (1867),  18  N.  J.  Eq.  383. 

23  Katz  v.  Brewington  (1889),  71  24Katz  v.  Brewington,  supra, 

Md.  79,  20  Atl.  139,  Mechem  's  Cas.  25  Sec.  20. 

929,  Gilm.  Cas.  433 ;  Harris  v.  Har-  26  Sec.  18,  subd.  e, 

160 


RIGHTS   AND   DUTIES  OF   PARTNERS 


[i 


pensation  for  his  services  for  the  partnership,  but  must  be  con- 
tent with  his  share  of  the  profits,  if  any.27  It  makes  no  differ- 
ence that  his  services  are  more  valuable  than  those  of  any  other 
partner,  or  that  he  performs  a  greater  portion  of  the  duties 
than  any  other.28  Nor  does  the  fact  that  one  partner  is  disabled 
by  sicknesss  from  rendering  any  service  give  another  partner, 
who  performs  it  all,  a  claim  for  compensation,  for  such  sickness 
is  one  of  the  risks  incident  to  the  relation.29  Even  where  one 
partner,  after  dissolution  by  death  or  otherwise,  winds  up  the 
business  of  the  firm,  he  is  not  ordinarily  entitled  to  extra  com- 
pensation out  of  the  proceeds ;  30  though  he  has,  under  various 
circumstances,  been  held  to  be  entitled  to  it  where,  after  dis- 
solution by  death,  he  carries  on  the  business  successfully  with 
the  consent  of  those  interested,  until  it  could  be  wound  up.11 


27Lindsey  v.  Stranahan  (1889), 
129  Pa.  635,  18  Atl.  524,  Mechem's 
Gas.  279,  Gilm.  Gas.  435;  Ma- 
jor v.  Todd  (1890),  84  Mich.  85, 
47  N.  W.  841;  Godfrey  v.  White 
(1880),  43  Mich.  171,  5  N.  W.  243; 
Hyre  v.  Lambert  (1892),  37  W. 
Va.  26,  16  S.  E.  446;  Ligare  v.  Pea- 
cock (1884),  109  111.  94;  Eedfield 
v.  Gleason  (1888),  61  Vt.  220,  17 
Atl.  1075,  15  Am.  St.  R.  889;  Cam- 
eron v.  Francisco  (1875),  26  Ohio 
St.  190;  Buggies  v.  Buckley  (1910), 
99  C.  C.  A.  73,  175  Fed.  57,  27 
L.  E.  A.  (N.  S.)  541,  20  Ann.  Gas. 
1057;  Wisner  v.  Field  (1902),  11 
N.  Dak.  257,  91  N.  W.  67;  Caldwell 
v.  Leiber  (1839),  7  Paige  (N.  Y.) 
Ch.  483;  Consaul  v.  Cummings 
(1911),  222  U.  S.  262,  32  Sup.  Ct. 
83.  But  see  Mattingly  v.  Stone 
(1896),  35  S.  W.  (Ky.)  921,  18 
Ky.  L.  R.  187,  Burd.  Gas.  516. 
Where  there  was  a  promise  to  pay 
it,  an  action  at  law  may  be  main- 
tained for  its  recovery:  Paine  v. 
Thacher  (1841),  25  Wend.  (N.  Y.) 
450. 

Mech.  Part.— 11  161 


28  See  Burgess  v.  Badger  (1888), 
124  111.  288,  14  N.  E.  850 ;  Williams 
v.  Pederson   (1907),  47  Wash.  472, 
92  Pac.   287,  17  L.  R.  A.    (N.   S.) 
384  and  Note. 

29  See  Heath  v.  Waters  (1879),  40 
Mich.  457. 

30  See  Barry  v.  Jones   (1872),  58 
Tenn.  (11  Heisk.)  206,  27  Am.  Rep. 
742    (surviving   partner) ;    Maynard 
v.    Richards    (1897),    166    111.    466, 
46  N.  E.  1138,  57  Am.  St.  R.   145 
(surviving      partner) ;       Smith      v. 
Knight    (1893),    88    Iowa    257,    55 
N.  W.  189  (surviving  partner) ;  Con- 
saul  v.    Cummings    (1911),    222    U. 
S.   262,   32    Sup.    Ct.    83    (surviving 
partner) ;  In  re  Aldridge  [1894],  2 
Ch.  97    (surviving  partner  who  had 
made  no  profits). 

31  See      Robinson      v.      Simmons 
(1888),    146    Mass.    167,    15   N.    E. 
558,  4  Am.  St.  R.  299 ;  Zell  's  Appeal 
(1889),  126  Pa.  329,  17  Atl.   647; 
Condon    v.     Callahan     (1905),     115 
Tenn.  285,  89  S.  W.   400,   112  Am. 
St.  R.  833,  1  L.  R.  A.  (N.  S~.)  643; 
Maynard   v.    Richards    (1897),    166 


§  179]  LAW  OP  PARTNERSHIP 

If  one  partner  is  thus  ordinarily  not  entitled  to  extra  com- 
pensation for  his  services,  it  is  all  the  more  clear  that  he  will 
not  be  so  entitled  where  he  has  wrongfully  excluded  his  partner 
from  participation  in  the  business.32 

The  Uniform  Partnership  Act  reaffirms  the  general  rule, 
though,  contrary  to  what  is  believed  to  be  the  weight  of  au- 
thority, it  gives  compensation  to  the  surviving  partner.33 

§179.  Same  subject — May  be  agreement  to  pay  it. — But 

there  may  be  an  agreement  to  pay  a  partner  for  his  services 
as  such,  and  this  agreement  may  be  express  or  implied.  "Where 
it  can  be  fairly  and  justly  implied, ' '  said  the  court  in  one  case,34 
"from  the  course  of  dealing  between  the  partners,  or  from  cir- 
cumstances of  equivalent  force,  that  one  partner  is  to  be  com- 
pensated for  his  services,  his  claim  will  be  sustained."  It  has 
been  so  implied,  for  example,  where  one  partner  gave  his  whole 
time  to  strangers  for  a  salary  which  he  retained,  or  devoted 
his  entire  time  and  energy  to  his  own  separate  business,  leaving 
the  claimant  partner  to  manage  the  firm  business  alone.35  It 

111.  466,  46  N.  E.  1138,  57  Am.  St.  711,   147   N.   W.   148;    Maynard  v. 

R.     145;      Cameron     v.     Francisco  Maynard    (1917),   147   Ga.    178,   93 

(1875),  26  Ohio  St.  190;  Thayer  v.  S.  E.  289;  Rains  v.  Weiler   (1917), 

Badger    (1898),   171   Mass.  279,  50  101  Kan.  294,  166  Pac.  235,  L.  R.  A. 

N.  E.  541,  Gilm.  Cas.  435.  1917  F,    571.      See,   also,    Askew    v. 

32Hannaman  v.   Karrick    (1893),  Springer     (1884),     111     111.     662; 

9  Utah  236,  33  Pac.  1039.  Weeks    v.    MeClintock     (1887),    50 

33  Sec.  18,  subd.  /.    "No  partnei  Ark.  193,  6  S.  W.  734;  Lassiter  v. 
is  entitled  to  remuneration  for  act-  Jackman  (1882),  88  Ind.  118. 

ing  in  the  partnership  business,  ex-  In    Mondamin    Bank    v.    Burke, 

cept  that  a  surviving  partner  is  en-  supra,  the   court,   while  recognizing 

titled    to    reasonable    compensation  the  general  rule,   said   "where   one 

for  his  services  in  winding  up  the  partner  has  had  full  charge  of  the 

partnership  affairs."  partnership    business,    attending    to 

34  Emerson  v.  Durand  (1885),  64  practically  all  its  affairs  while  the 
Wis.    Ill,   24   N.   W.    129,   54   Am.  other   partners  have   tacitly   or   ex- 
Rep.  593.  pressly   acquiesced    therein  and   de- 

85  Emerson     v.     Durand,     supra;  voted  their  own  time  and  energies 

Morris  v.   Griffin    (1891),    83    Iowa  wholly  to  their  personal  affairs,  an 

327,  49  N.  W.  846;  Levi  v.  Karrick  agreement  to  compensate  the  active 

(1862),    13    Iowa    344;    Mondamin  partner  will  be  much  more  readily 

Bank    v.    Burke    (1914),    165    Iowa  implied  than  where  all  the  partners 

162 


RIGHTS   AND   DUTIES  OF  PARTNERS  [§  180 

has  been  implied  from  the  acquiescence  and  course  of  dealing 
of  the  partners.36  "Unusual  conditions"  or  "exceptional  cir- 
cumstances," it  is  said,  may  justify  it.37 

Where  one  partner  is  expressly  to  be  paid  in  consideration 
of  extra  services,  he  will  not  be  entitled  to  pay  if  such  services 
are  not  rendered,  even  though  he  was  disabled  by  illness.38 

Where  one  partner  carries  on  the  business  under  such  cir- 
cumstances that  he  would  not  otherwise  be  entitled  to  extra 
compensation,  it  has  been  held  that  he  cannot  establish  a  right 
to  it,  by  acquiescence,  by  crediting  it  to  himself  on  the  firm 
books,  if  the  other  partner  knew  nothing  of  that  fact  and  for 
that  reason  did  not  object.39 

§  180.  Liability  of  partner  for  not  performing  agreed  service. 
— Even  though,  as  has  just  been  seen,  one  partner  may  not  be 
entitled  to  extra  compensation  where  he  performs  more  than 
his  pro  rata  share  of  the  work,  still  if  a  partner  undertakes  to 
perform  some  particular  service  or  line  of  service  for  the  firm 
and  without  justification  fails  to  do  so,  making  it  necessary  to 
employ  some  other  person  to  perform  the  agreed  service  or  other- 
wise causing  direct  loss  to  the  firm,  the  amount  of  such  expense 
or  loss  may  properly  be  chargeable  against  the  defaulting  part- 
ner on  a  partnership  accounting.40  Whether  an  action  at  law 

are  also  giving  some  degree  of  ac-  37  See  Hoag  v.  Alderman  (1903), 

tive  attention  to   the  promotion  of  184  Mass.  217,  68  N.  E.  199;  May- 

the  common  interest."  nard   v.   Maynard    (1917),   147    Ga. 

But     in     Lindsey     v.     Stranahan  178,  93  S.  E.  289. 

(1889),  129   Pa.   635,   18  Atl.  524,  38  See   Kinney   v.   Maher    (1892), 

Mechem's   Gas.   279,   extra   eompen-  156  Mass.  252,  30  N.  E.  818. 

eation    was    denied   to    one    partner  39  Lindsey  v.  Stranahan,  supra. 

who  did  all  the  work.  40 See  Marsh's  Appeal  (1871),  69 

36  Winchester  v.  Glazier  (1890),  Pa.  30,  8  Am.  E.  206;  Hart  v.  My- 
152  Mass.  316,  25  N.  E.  728,  9  L.  ers  (1891),  59  Hun  (N.  Y.)  420,  13 
E.  A.  424;  Eains  v.  Weiler,  supra.  N.  Y.  S.  388;  Stegman  v.  Berry  hill 
As  to  validity  of  subsequent  promise  (1880),  72  Mo.  307;  Miller  v.  Free- 
to  pay  in  consideration  of  past  ex-  man  (1900),  111  Ga.  654,  36  S.  E. 
tra  services,  see  Gray  v.  Hamil  961,  51  L.  E.  A.  504,  Mechem's 
(1889),  82  Ga.  375,  10  S.  E.  205,  6  Cas.  894;  Lay  v.  Emery  (1899),  8 
L.  E.  A.  72  (applying  the  Georgia  N.  Dak.  515,  79  N.  W.  1053. 
Code).  Inability  from  sickness  to  render 


§§  181,  182]  LAW  OP  PARTNERSHIP 

for  damages  may  be  maintained  by  the  other  partner  will  de- 
pend upon  considerations  discussed  in  a  later  section.41 

§181.  Partner's  right  to  return  of  advances. — A  partner 
has  the  right  to  have  returned  to  him  the  amount  of  his  ad- 
vances, loans  and  proper  disbursements  made  to  or  on  account 
of  the  firm,  which  were  not  made  as  part  of  or  additions  to  his 
contributions  to  the  permanent  capital  of  the  firm,42  and  which 
were  not  rendered  necessary  by  the  partner's  own  default  or 
made  in  violation  of  the  partnership  agreement.43  /  Such  ad- 
vances, as  will  be  seen  hereafter,  take  priority  in  the  order  of 
payment  out  of  the  firm's  assets  over  contributions  to  capital, 
though  they  are,  of  course,  subordinate  to  the  payment  of  the 
firm  debts  to  non-partners.44 

The  time  at  which  the  partner  would  be  entitled  to  demand 
the  return  or  repayment  of  such  advances  would  depend  largely 
upon  the  agreement  or  circumstances  under  which  they  were 
made.  His  remedy  to  compel  repayment  would  be  affected  by 
several  considerations.  He  could  not  ordinarily  sue  for  them 
at  law,  though,  if  they  were  represented  by  the  firm 's  negotiable 
paper  at  least,  he  could  often  transfer  them  to  a  third  person 
who  could  sue  at  law.46  His  remedy  in  equity  for  an  accounting 
before  a  final  accounting  would  in  many  cases  be  doubtful.46 

§  182.  Right  of  partner  to  interest  on  money  advanced — On 
capital. — By  the  earlier  authorities,  at  least,  a  partner  who 

purely  personal  services  would  doubt-  to:    McFadden  v.  Leeka  (1891),  48 

less  cause  an  exception,  as  in  other  Ohio    St.    513,    28   N.   E.    874,   Me- 

similar  cases.  chem's  Gas.  280. 

41  See  post,  §  214.  44  See  post,  §  469, 

42  See     Lindley     on     Partnership  45  See      Carpenter      v.      Greenop 
(7th  ed.),  p.  419;   Folsom  v.  Mar-  (1889),  74  Mich.  664,  42  N.  W.  276, 
ktte   (1897),  23  Nev.  459,  49  Pac.  16  Am.  St.  R.  662,  4  L.  R.  A.  241, 
39;   Whiteomb  v.   Converse    (1875),  Mechem's  Gas.  296;   Knaus  v.  Giv- 
119  Mass.  38,  20  Am.  R.  311,  Me-  ens   (1892),  110  Mo.   58,  19  S.  W. 
chem's    Gas.    692;    Baker    v.    Mayo  535;   Jennings  v.  Pratt   (1899),  19 
(1880),  129  Mass.  517.  Utah  129,  56  Pac.  951. 

43  Partner    may    not    charge    co-  46  See   Lord  v.  Hull    (1904),  178 
partners    with    loans    or    advances  N.  Y.  9,  70  N.  E.  69,  102  Am.  St. 
made  in  violation  of  the  partnership  R.  484,  Mechem's  Gas.  920. 
articles  and  not  otherwise  assented 

164 


EIGHTS   AND   DUTIES  OP   PARTNERS 


[§182 


advances  money  for  partnership  purposes  is  usually  held  to  be 
not  entitled 'to  interest  upon  it,  in  advance  of  a  partnership 
accounting,  and  a  balance  thereby  found  to  be  due,  unless  there 
has  been  an  agreement  express  or  implied  to  pay  interest,  though 
by  some  authorities  it  is  allowed.47  Mercantile  usage,  however, 
and  the  course  of  dealing  between  the  partners  may  be  sufficient 
to  sustain  an  implication  of  a  promise  to  pay  interest.48  ' '  Slight 
circumstances,"  said  the  court  in  one  case,49  "may  be  sufficient 
to  show  such  an  undertaking. ' ' 

By  the  modern  authorities,  on  the  other  hand,  interest  is  more 
readily  allowed,  and  sums,  distinct  from  capital,  which  may 
fairly  be  regarded  as  loans  to  the  firm,  are  often  held  to  draw 
interest  wherever  a  similar  loan  to  a  third  person  would  do  so.50 


47  See  Prentice  v.  Elliott   (1883), 
72     Ga.     154;     Clark     v.     Warden 
(1880),  10  Neb.  87;   Dexter  v.  Ar- 
nold (1823),  3  Mason  (U.  S.  C.  C.) 
284;  Oilman  v.  Vaughan  (1878),  44 
Wis.  646. 

More  modern  cases  such  as  Lamt> 
v.  Eowan  (1903),  83  Miss.  45,  35 
So.  427,  and  Ice  v.  Kilworth  (1911), 
84  Kan.  458,  114  Pac.  857,  35  L, 
R.  A.  (N.  S.)  220  (with  Note), 
also  adopt  this  view  of  no  interest. 

48  See  per  Knight  Bruce,  L.  J.,  in 
Ex    parte    Chippendale     (1853),    4 
DeG.  M.  &  G.  19. 

49  Winchester   v.    Glazier    (1890), 
152  Mass.  316,  25  N.  E.  728,  9  L. 
R.  A.  424. 

.  50  See  Rodgers  v.  Clement  (1900), 
162  N.  Y.  422,  56  N.  E.  901,  76  Am. 
St.  R.  342;  Baker  v.  Mayo  (1880), 
129  Mass.  517;  Mack  v.  Engel 
(1911),  165  Mich.  540,  131  N.  W. 
92;  Coldren  v.  Clark  (1895),  93 
Iowa  352,  61  N.  W.  1045;  Matthews 
v.  Adams  (1896),  84  Md.  143,  35 
Atl.  60. 

A  share  of  profits  apportioned  to 
a  partner,  but  left  unwithdrawn  by 
him,  but  subject  to  withdrawal  at 


his  pleasure  at  any  time,  would  'or- 
dinarily, in  the  absence  of  some 
special  circumstances  or  an  agree- 
ment of  the  parties,  have  slight 
claim  to  rank  as  an  advance  or  loan 
to  the  firm  so  as  to  be  entitled  to. 
interest  and  still  less  to  be  regarded 
as  a  fresh  contribution  to  capital 
so  as  to  draw  interest  under  an 
agreement  to  pay  interest  on  capital. 
See  Dinham  v.  Bradford  (1869),  L. 
R.  5  Ch.  App.  519;  Tutt  v.  Land 
(1873),  50  Ga.  339. 

One  partner  who  loans  money  to 
another  partner  personally,  even 
though  to  enable  the  latter  to  make 
his  contributions  to  firm  expenses, 
is  entitled  to  interest  from  the 
borrowing  partner:  Bartlett  v. 
Boyles  (1909),  66  W.  Va.  327,  66 
S.  E.  474. 

Liability  to  interest  on  sums  with- 
drawn— One  partner  who  has  over- 
drawn, etc.,  held  not  liable  to  the 
firm  for  interest,  in  the  absence  of 
express  or  implied  agreement  to  pay 
or  of  fraud  or  concealment  in  the 
matter:  Atherton  v.  Whitcomb 
(1894),  66  Vt.  447,  29  Atl.  674; 
Gilman  v.  Vaughan  (1878),  44  Wis. 


165 


183] 


LAW  OP  PARTNERSHIP 


§183. 


Contributions  to  capital,  on  the  other  hand,  do 


not  draw  interest  in  the  absence  of  an  agreement  to  pay  it.61 
Eacih  partner's  right  to  share  in  the  profits  is  supposed  to  com- 
pensate him  for  the  use  of  his  capital.  It  is  immaterial,  in  this 
respect,  that  the  contribution  to  capital  of  the  partner  who  claims 
the  interest  is  greater  than  that  of  his  co-partner.62  Agree- 
ments to  pay  interest  upon  capital  are  not  infrequently  made.53 

The  Uniform  Partnership  Act,54  provides  that  '''A  partner, 
who  in  aid  of  the  partnership,  makes  any  payment  or  advance 
beyond  the  amount  of  capital  which  he  agreed  to  contribute, 
shall  be  paid  interest  from  the  date  of  the  payment  or  advance. ' ' 

"A  partner  shall  receive  interest  on  the  capital  contributed 
by, him  only  from  the  date  when  repayment  should  be  made." 


646;  Kemxnerer  v.  Kemmerer 
(1892),  85  Iowa  193,  52  N.  W. 
194;  Wendling  v.  Jennisch  (1892), 
85  Iowa  392,  52  N.  W.  341;  Swee- 
ney v.  Neeley  (1884),  53  Mich. 
421,  19  N.  W.  127;  Brenner  v.  Car- 
ter (1902),  203  Pa.  75,  52  Atl.  178, 
especially  where  one  had  overdrawn 
about  as  much  as  the  other:  Ather- 
ton  v.  Whitcomb,  supra;  Harris  v. 
Carter  (1888),  147  Mass.  313,  17 
N.  E.  649  (no  implication  of  agree- 
ment to  pay  under  such  circum- 
stances). 

But,  contra,  see  Forsyth  v.  But- 
ler (1907),  152  Cal.  396,  93  Pac. 
90. 

Where  firm  is  borrowing  money 
and  paying  interest  to  operate  upon, 
obligation  of  partner  to  pay  inter- 
est on  his  overdrafts  is  more  readily 
found.  Forsyth  v.  Butler,  supra. 

If  a  partner  is  allowed  interest  on 
advances,  he  should  be  charged  in- 
terest on  his  withdrawal:  Boreing  v. 
Wilson  (1908),  128  Ky.  570,  108 
S.  W.  914. 

Where  there  is  an  agreement  to 
allow  interest  on  capital  sums  and 


charge  interest  on  withdrawals,  but 
no  date  is  agreed  upon,  it  must  be 
computed  to  end  of  partnership: 
McCall  v.  Moss  (1885),  112  111.  493. 

51  See  Eodgers  v.  Clement  (1900), 
162   N.   Y.   422,   56   N.    E.   901,   76 
Am.    St.    E,    342;    Moore    v.    West- 
brook   (1911),  156  N.  Car.  482,  72 
S.  E.   842,  Ann.   Cas.   1913  A,   168; 
St.  Paul  Trust  Co.  v.  Finch  (1893), 
52  Minn.  342,  54  N.  W.  190. 

One  partner  not  liable  for  interest 
on  unpaid  capital:  Wilson  v.  Mc- 
Carty  (1877),  25  Grant's  Ch.  (U. 
Can.)  152. 

Where  there  was  an  agreement  to 
pay  interest:  Whitcomb  v.  Converse 
(1875),  119  Mass.  38,  20  Am.  Sep. 
311,  Mechem's  Cas.  692;  Winches- 
ter v.  Glazier  (1890),  152  Mass. 
316,  25  N.  E.  728,  9  L.  E.  A.  424; 
Juilliard  v.  Orem  (1889),  70  Md. 
465,  17  Atl.  333. 

52  See  Desha  v.  Smith  (1852),  20 
Ala.  747;   Harris  v.  Carter   (1888), 
147  Mass.  313,  17  N.  E.  649. 

53  See,    e.   g.,    Whitcomb    v.    Con- 
verse, Winchester  v.  Glazier,  supra. 

54  Sec.  18  (c)  and  (<f). 

166 


EIGHTS   AND   DUTIES  OF   PARTNERS  [§§  184,  185 

§184.  Right  of  partners  to  have  partnership  property  ap- 
plied to  partnership  debts. — It  is  the  right  of  each  partner  to 
have  all  of  the  partnership  property  applied  so  far  as  it  may 
be  necessary  to  the  payment  of  the  debts  and  liabilities  arising 
out  of  the  partnership,  and  for  the  enforcement  and  protection 
of  this  right  he  is  often  said  to  have  a  lien  upon  or  equity  in 
the  property. 

Whether  the  right  or  equity  of  the  partners  is  strictly  to  be 
deemed  a  lien,  as  it  is  so  often  called,  is  perhaps  open  to  ques- 
tion, though  the  name  cannot  be  regarded  as  of  great  importance 
while  the  right  itself,  by  whatever  name  it  may  be  called,  is 
clearly  settled  both  in  reason  and  authority.55 

Out  of  this  right  grow  two  rules  of  much  importance : 

§  185.  Partner  may  not  apply  partnership  property  to 

his  own  uses. — First.  One  partner  may  not,  without  the  con- 
sent of  the  other,  apply  the  partnership  property  to  his  own 
uses  or  to  his  own  debts,  and  of  this  the  parties  who  deal  with 
him  must  take  notice  at  their  peril. 

One  partner,  therefore,  without  the  express  or  implied  con- 
sent of  his  co-partners,  may  not  pledge,  mortgage  or  assign 
specific  partnership  property  as  security  or  payment  of  his  own 
debts;  he  may  not  apply  partnership  funds  in  satisfaction  of 
his  own  obligations;  he  may  not  use  the  firm's  name  or  credit 
on  his  private  account;  he  may  not  set  off  a  private  account 
against  a  debt  due  the  firm:  in  all  these  and  similar  cases  the 
firm  is  not  bound,  and  the  firm's  property,  funds  or  credits 
may  be  recovered,  unless  the  other  party  is  in  a  situation  to 
claim  the  protection  afforded  to  a  bona  fide  holder  for  value 
and  without  notice.66 

55  See  post,  chapter  XIX,  on  the  Farwell     v.     St.     Paul     Trust     Co. 
Lien  of  Partners.  (1891),  45  Minn.  495,  48  N.  W.  326, 

56  See  Davies  v.  Atkinson  (1888),  22    Am.    St.    R.    742;    Bruckett    v. 
124  111.  474,   16  N.  E.   899,  7  Am.  Downs.  (1895),  163  Mass.  70,  39  N. 
St.    E.    373    and    note;    Cannon    v.  E.  776;  Rogers  v.  Betterton  (1894), 
Lindsay  (1887),  85  Ala.  198,  3  So.  93  Tenn.  630,  27  S.  W.  1017;  Cowen 
676,   7   Am.   St.   R.   38;    Janney  v.  v.    Hardware    Co.    (1892),    95    Ala. 
Springer    (1889),   78   Iowa  617,  43  324,  11  So.  195. 

N.    W.   461,    16    Am.    St.    R.    460;          As  to  the  effect  of  the  guilty  part- 

167 


§  186]  LAW  OF  PARTNERSHIP 

The  right  of  one  partner  to  make  such  an  application  of  the 
partnership  assets  with  the  previous  consent  or  subsequent  ratifi- 
cation of  the  other  partners  is  clear  enough,  where  the  claims 
of  the  partnership  creditors  are  not  thereby  impaired.  Whether 
it  may  be  done  with  such  consent  at  the  expense  of  the  part- 
nership creditors  depends  upon  other  considerations,  similar  to 
those  involved  in  the  following  section,  and  hereafter  more  fully 
to  be  examined. 

§  186.  Claims  of  partnership  creditors  based  on  rights  of 

partners. — Secondly.  Upon  dissolution  of  the  partnership  and 
a  distribution  of  its  assets  by  a  court,  this  right  will  be  enforced 
(subject,  of  course,  to  any  valid  liens  or  charges  created  or 
incurred  before  the  court  acquired  control),  based  upon  the 
presumption  that  such  is  the  wish  of  each  partner,  and  the  part- 
nership creditors  will  be  given  a  preference  in  the  partnership 
assets  over  the  individual  creditors  of  the  partners.  The  rule 
is  sometimes  stated,  as  will  be  more  fully  seen  hereafter,67  that 
the  partnership  creditors  have  a  lien  upon,  or  an  absolute  right 
to  priority  of  payment  out  of,  the  partnership  property;  but 
the  weight  of  modern  authority  is  rather  to  the  effect  that  their 
rights  are  derivative  and  based  upon  this  right  of  the  partners 
to  have  the  firm  property  applied  to  the  partnership  debts.88 
As  is  said  in  one  case :  ' '  The  rule  that  obtains  in  the  distribu- 

ners'  act  upon  his  right  to  be  a  A.  535,  21  N.  E.  543;  Ellison  v. 
party  to.  an  action  to  recover,  see  Lucas  (1891),  87  Ga.  224,  27  Am. 
post,  §331.  St.  E.  242,  13  S.  E.  445;  Eeyburn 
Where  partner  wrongfully  uses  v.  Mitchell  (1891),  106  Mo.  365,  27 
firm  funds  in  paying  for  and  im-  Am.  St.  E.  350,  16  S.  W.  592;  Gold- 
proving  lands  for  the  benefit  of  his  smith  v.  Eichold  Bros.  (1891),  94 
wife,  equity  will  charge  the  lands  to  Ala.  116,  33  Am.  St.  E.  97,  10  So. 
the  extent  of  the  benefit  so  con-  80;  Arnold  v.  Hagerman  (1888),  45 
f erred:  Brown  v.  Orr  (1909),  110  N.  J.  Eq.  186,  14  Am.  St.  Eep.  712, 
Va.  1,  65  S.  E.  499,  135  Am.  St.  E.  17  Atl.  93,  Mechem's  Gas.  602,  Gilm. 
912.  Cas.  223;  Hundley  v.  Farris  (1890), 

57  See  post,  Ch.  XX.  103  Mo.  78,  23  Am.  St.  E.  863,  12 

58  See  Winslow  v.  Wallace  (1888),  L.  E.  A.  254,  15  S.  W.  312;  Carver 
116   Ind.    324,    17   N.   E.    923,   Me-  Machine  Co.  v.  Bannon    (1887),  85 
chem's  Cas.  658;  Purple  v.  Farring-  Tenn.  712,  4  Am.  St.  E.  803,  4  S. 
ton   (1889),  119  Ind.  164,  4  L.  E.  W.  331. 

168 


RIGHTS   AND  DUTIES  OF  PARTNERS  [§  187 

tion  of  the  estates  of  partners,  and  under  which  partnership 
creditors  are  entitled  to  priority  of  payment  out  of  the  part- 
nership assets,  is  an  equitable  doctrine,  for  the  benefit  and  pro- 
tection of  the  partners  respectively.  Partnership  creditors  have 
no  lien  upon  partnership  property.  Their  right  to  priority  of 
payment  out  of  the  partnership  assets  over  the  individual  cred- 
itors is  always  worked  out  through  the  lien  of  the  partners. ' ' 

The  fuller  treatment  of  this  subject  is,  however,  reserved  for 
a  later  chapter ;  and  the  effect  of  the  old  and  new  statutes  against 
fraudulent  conveyances  will  there  be  considered. 

§187.  Partner's  right  to  contribution  from  copartners. — As 

will  be  seen  hereafter,69  the  obligation  of  those  contractual  debts 
and  liabilities  which  are  binding  upon  the  firm  is  the  joint  obli- 
gation of  all  the  partners  and  not  the  several  obligation  of  any 
of  them;  they  should  therefore  be  borne  by  all  the  partners 
and  not  by  one  alone.  So  with  regard  to  the  torts  for  which 
the  firm  is  liable:  while  the  person  injured  may  often  sue 
the  partners  either  jointly  or  severally,60  still,  as  between  the 
partners  themselves,  the  liability,  when  not  caused  by  the  culp- 
able act  or  default  of  the  partner  seeking  contribution,61  is 
usually  one  to  be  borne  by  all  of  them.  It  results,  then,  that 
if  one  partner  pays  or  is  compelled  to  bear  more  than  his  just 
share  of  such  debts  and  liabilities,  he  is,  when  not  himself  culp- 
ably responsible  for  them,  entitled  to  demand  that  his  co-partners 
shall,  for  his  relief,  contribute  their  due  proportion  thereof.62 
So  if,  in  the  conduct  of  the  partnership  affairs,  one  partner 
is  called  upon  to  advance  money  for  partnership  purposes,  or 
fairly  and  in  good  faith  incurs  an  obligation  on  the  firm  ac- 
count, he  is  entitled  to  reimbursement  from  the  firm  for  his 

59  See  post,  §  308.  Ala.    368,    51    So.    17;    Brownell   v. 

60  See  post,  §  312.  Steere  (1889),  128  111.  209,  21  N.  E. 

61  As  to  this,  see  ante,  §  173.  3;    Phillips    v.    Blatchford    (1884), 

62  See  Forbes  v.  Webster   (1829),  137   Mass.   510;    Logan   v.    Trayser 
2  Vt.  58;  Lyons  v.  Murray  (1888),  (1890),  77  Wis.  579,  46  N.  W.  877; 
95  Mo.  23,  8  S.  W.  170,  6  Am.  St.  Smith  v.  Ayrault   (1888),  71  Mich. 
R.  17;  Downs  v.  Jackson  (1864),  33  475,  39  N.  W.  724,  1  L.  R.  A.  311; 
111.  464,  85  Am.  Dee.  289,  Gilm.  Gas.  Sperry  v.  Tulley  (1915),  76  W.  Va. 
436;  Northen  v.  Tatum  (1909),  164  106,  84  S.  E.  1067. 

169 


188] 


LAW  OP  PARTNERSHIP 


outlay,  and  to  be  indemnified  by  the  firm  against  such  obliga- 
tion.63 

The  partner's  right  to  reimbursement  or  indemnity,  however, 
will  not  arise  if  the  demand,  with  respect  of  which  he  claims  it, 
was  one  which  by  agreement  he  was  to  bear  alone,  or  if  it  was 
not  fairly  and  in  good  faith  incurred,  or  if  the  necessity  for  it 
arose  only  through  his  own  culpable  negligence,  bad  faith  or 
breach  of  duty.64 

The  Uniform  Partnership  Act  provides  that  "The  partner- 
ship must  indemnify  every  partner  in  respect  of  payments  made 
and  personal  liabilities  reasonably  incurred  by  him  in  the  ordi- 
nary and  proper  conduct  of  its  business,  or  for  the  preservation 
of  its  business  or  property. ' ' 65 

This  Act  also  has  a  special  provision  respecting  contribution 
after  dissolution,  which  will  be  referred  to  later. 

§188.  On  illegal  transactions. — "There  is  a  saying," 

remarks  Mr.  Justice  Lindley,66  "that  there  is  no  contribution 


63  See.  Wheeler  v.  Arnold   (1874), 
30  Mich.  304. 

64  See  McFadden  v.  Leeka  (1891), 
48  Ohio  St.  513,  28  N.  E.  874,  Me-' 
chem  's  Cas.  280  (no  contribution  for 
debt  incurred  in  violation  of  part- 
nership articles) ;  Thomas  v.  Ather- 
ton   (1878),  10  Ch.  Div.  185   (man- 
aging partner   of   a  mine  held  not 
entitled  to  contribution  where  dam- 
ages had  been  awarded  against  him 
for  encroaching  upon  the  adjoining 
property  under   circumstances   char- 
acterized by  the  court  as  "rash  or 
reckless"    and    as   involving    "very 
serious  and  culpable  neglect  on  his 
part");   Clayton  v.  Davett   (1897), 
38  Atl.    (N.   J.)    308    (no   contribu- 
tion to  payment  of  damages  recov- 
ered against  partner,  who  seeks  con- 
tribution,    because      of     his      own 
fraud);  Yorks  v.  Tozer   (1894),  59 
Minn.  78,  60  N.  W.  846,  28  L.  B. 
A.  86,  50  Am.  St.  E.  395,  Meehem's 


Cas.  278  (no  contribution  toward 
payment  made  grossly  negligently)  ; 
In  re  Worcester  Corn  Exchange 
(1853),  3  DeG.  M.  &  G.  180  (no 
contribution  as  to  debts  which  were 
unauthorized) ;  Loy  v.  Alston 
(1909),  96  C.  C.  A.  578,  172  Fed. 
90  (partner  who  wrongfully  excludes 
his  copartner  from  all  part  in  man- 
agement not  entitled  to  contribution 
for  debts  subsequently  incurred). 

But  the  mere  fact  that  the  debt 
was  unwisely  incurred,  there  being 
no  dishonesty  or  bad  faith,  is  not 
enough  to  bar  contribution:  Charl- 
ton  v.  Sloan  (1888),  76  Iowa  288, 
41  N.  W.  303,  Gilm.  Cas.  439. 

65  Sec.  18,  subd.  b. 

66  1  Lindley  on  Partnership  (Ew- 
ell's  2d  ed.),  378. 

Mr.  Justice  Lindley  further  say^: 
' '  The  case  which  presents  most  diffi- 
culty is  one  in  which  an  unlawful 
act  has  been  knowingly  performed 


170 


RIGHTS   AND  DUTIES  OF   PARTNERS  [§  188 

amongst  wrong-doers;  but  this  doctrine  is  certainly  inapplicable 
to  partners  in  the  general  form  in  which  it  is  enunciated.  It 
is  true  that,  if  a  partnership  is  itself  illegal,  no  member  of  it 
can,  in  respect  of  any  transaction  tainted  with  the  illegality 
which  infects  the  firm,  obtain  relief  against  any  other  member; 
but  there  is  no  authority  for  saying  that  if  one  of  the  members 
of  a  firm  sustains  a  loss  owing  to  some  illegal  act  not  attributable 
to  him,  but  yet  imputable  to  the  firm,  such  loss  must  be  borne 
entirely  by  him,  and  that  he  is  not  entitled  to  contribution  in 
respect  thereof  from  the  other  partners.  The  claim  of  a  partner 
to  contribution  from  his  co-partners  in  respect  of  a  partnership 
transaction  cannot  be  defeated  on  the  ground  of  illegality  unless 
the  partnership  is  itself  an  illegal  partnership;  or  unless  the 
act  relied  on  as  the  basis  of  the  claim  is  not  only  illegal,  but 
has  been  committed  by  the  partner  seeking  contribution  when 
he  knew  or  ought  to  have  known  of  its  illegality.  In  any  of 
these  cases  he  can  obtain  no  assistance  against  his  co-partners, 
and  must  abide  the  consequences  of  his  own  wilful  breach  of 
the  law.67  *  *  *  But  if  the  partnership  is  not  itself  illegal, 

by  all  the  partners,  so  that  all  arc  partnership  accounts,  to  charge  his 
in  pari  delicto.  There  is  a  dictum  copartners,  rateably  with  himself, 
of  Lord  Cottenham  to  the  effect  that  with  the  amount  paid  by  him.  See 
in  such  a  case  each  partner  must  Ashurst  v.  Mason,  20  Eq.  225;  Jack- 
bear  all  the  loss  he  may  happen  to  son  v.  Dickinson  [1903],  1  Ch.  947." 
sustain,  and  that  he  cannot  require  67  Quoted  with  approval  in  Smith 
his  copartners  to  share  that  loss,  v.  Ayrault  (1888),  71  Mich.  475, 
(Attorney  General  v.  Wilson,  Cr.  &  39  N.  W.  724,  1  L.  E.  A.  311. 
Ph.  1) ;  but,  on  the  other  hand,  there  The  question  of  the  right  to  con- 
is  a  decision  which  goes  far  to  show  tribution  where  partnership  was 
that  the  loss  ought  to  be  apportioned  illegal  is  discussed,  ante,  §  46. 
between  all  the  partners,  unless  the  See,  also,  Estate  of  Ryan  (1914), 
illegal  act  in  question  is  a  pure  tort,  157  Wis.  576,  147  N.  W.  993.  (The 
or  a  direct  violation  of  some  statute,  partners  were  not ' '  conscious  wrong- 
er unless  the  contract  of  partnership  doers.  They  were  acting  honestly  and 
is  itself  void  on  the  ground  of  il-  in  good  faith,  but  under  a  mistaken 
legality.  It  is  apprehended  that  if  conception  of  the  law,  and  hence  the 
all  the  members  of  a  firm  were  right  of  contribution  exists"):  Da- 
equally  guilty  of  a  breach  of  trust,  vis  v.  Gelhaus  (1886),  44  Ohio  St. 
and  one  of  the  firm  alone  had  made  69,  4  N.  E.  593  (a  known  illegal 
it  good  out  of  his  own  money,  he  transaction,  contribution  denied) ; 
would  be  allowed,  in  taking  the  Armstrong  Co.  v.  Clarion  Co. 

171 


§§  189,  190]  LAW  OF  PARTNERSHIP 

and  if  the  partner  claiming  contribution  has  not  himself  been 
personally  guilty  of  a  breach  of  the  law,  his  claim  will  prevail, 
although  the  loss  in  respect  of  which  it  is  made  may  have  arisen 
from  an  unlawful  act." 

§  189. Upon  what  basis  determined. — Partners  may  and 

should  and  not  infrequently  do  expressly  agree  upon  the  ratio 
in  which  the  profits,  losses  and  expenses  of  the  business  are  to 
be  shared.  Where  such  an  agreement  exists,  it  is  ordinarily  con- 
clusive.68 Where  no  such  agreement  is  found  and  no  other  de- 
termining data  appear,  the  presumption  will  be  that  they  are 
to  share  equally  in  the  gains  and  burdens  of  the  business.69  This 
will  be  so  even  though  their  respective  contributions  to  the  firm 
capital  may  be  unequal.70 

The  rule  of  the  Uniform  Partnership  Act  will  be  found  in  the 
footnotes. 

§  190.  — —  How  enforced. — Whether  one  partner  has  really 
paid  more  than  his  just  proportion  on  the  partnership  account 
is  often,  if  not  usually,  a  question  requiring  some  investigation 
of  the  whole  partnership  accounts  to  determine.  If  one  partner 

(1870),  66  Pa.  218,  5  Am.  Eep.  368;  65  Oreg.  598,  133  Pac.  788;  Logan 

Jacobs  v.  Pollard   (1852),  64  Mass.  v.   Dixon    (1889),   73   Wis.   533,  41 

(10  Cush.)    287,  57  Am.  Dec.  105;  N.  W.  713. 

Spalding  v.   Oakes    (1869),   42  Vt.  70  See     Lindley     on     Partnership 

343;   Bailey  v.  Bussing    (1859),  28  (7th  ed.),  p.  385. 

Conn.  455;  Acheson  v.  Miller  (1853),  Uniform     Partnership     Act,     sec. 

2  Ohio  St.  203,  59  Am.  Dec.  663.  18 (a),  subject  to  any  agreement  be- 

68 See     Magilton     v.      Stevenson  tween  them,  "Each  partner  shall  be 

(1896),   173  Pa.   560,  34  Atl.   235,  repaid  his  contributions,  whether  by 

Gilm.  Cas.  445.  way  of  capital  or  advances  to  the 

69  See  Stein  v.  Eobertson  (1857),  partnership  property,  and  share 
30  Ala.  286;  Griggs  v.  Clark  (18~63),  equally  in  the  profits  and  surplus 
23  Gal.  427;  Eoach  v.  Perry  (1854),  remaining  after  all  liabilities,  in- 
16  HI.  37;  Warring  v.  Arthur  eluding  those  to  partners,  are  satis- 
<1895),  98  Ky.  34,  17  Ky.  L.  E.  fled;  and  must  contribute  towards 
605,  32  S.  W.  221,  Burd.  Cas.  518,  the  losses,  whether  of  capital  or 
Gilm.  Cas.  441;  Eandle  v.  Eichard-  otherwise,  sustained  by  the  partner- 
son  (1876),  53  Miss.  176;  Worthy  v.  ship,  according  to  his  share  in  the 
Brower  (1885),  93  N.  Car.  344;  profits." 
Eilers  Music  House  v.  Seine  (1913), 

172 


RIGHTS    AND   DUTIES   OF   PARTNERS  [§  191 

has  done  so  upon  one  occasion,  it  may  be  that  his  co-partner  upon 
some  other  occasion  has  paid  as  much  or  more  under  similar 
circumstances  for  which  he  also  has  a  claim  against  the  firm; 
and  how  the  final  balance  will  stand  may  be  a  matter  of  some 
uncertainty,  which  it  will  require  a  general  accounting  to  make 
clear.  As  will  be  seen  in  a  later  chapter,71  courts  of  law  arc 
not  usually  an  appropriate  forum  for  taking  such  an  account, 
and  the  parties  are  required  to  go  into  a  court  of  equitj^.  The 
result,  therefore,  is,  that  a  partner's  claim  for  contribution  or 
reimbursement  is  usually  one  to  be  enforced  only  in  a  court  of 
equity.72  It  is  not,  however,  always  so.  The  claim  may  arise 
in  respect  of  some  isolated  transaction ; 7S  it  may  be  that  the 
other  partner  has  recognized  its  validity  and  expressly  promised 
to  pay  his  share  without  reference  to  a  partnership  accounting ;  7* 
it  may  be  that  the  demand  did  not  arise  until  after  an  account- 
ing or  a  dissolution  and  accounting : 75  in  these  and  like  cases, 
as  will  be  seen  in  the  chapter  referred  to,  the  objection  to  legal 
proceeding  may  be  removed,  and  a  court  of  law  rather  than 
of  equity  may  take  jurisdiction. 

A  distinction  of  importance  may  depend  upon  whether  the 
action  for  contribution  is  at  law  or  in  equity :  at  law,  ordinarily, 
each  can  be  held  only  for  his  numerically  pro  rata  share,  while 
in  equity  the  insolvent  ones  and  those  out  of  the  jurisdiction  are 
not  counted.76 

§  191.  Right  of  other  partners  to  indemnity  for  losses  caused 
by  a  partner's  misconduct. — Contradistinguished  from  a  right 

71  See  post,  Chap.  IX.  73  See  Dorwart  v.  Ball  (1904),  71 

72  See  Lawrence  v.  Clark  (1840),      Neb.  173,  98  N.  W.  652. 
9   Dana    (Ky.)    257,    35    Am.    Dec.          74  See  post,  §§211,212. 

133;  Kennedy  v.  McFaddon  (1811),  75  See  Logan  v.   Trayser    (1890), 

3   H.  &  J.    (Md.)    194,  5  Am.  Dec.  77  Wis.  579,  46  N.  W.  877;    Scars 

434;  Murray  v.  Herrick  (1895),  171  v.  Starbird  (1889),  78  Cal.  225,  20 

Pa.    21,    32    Atl.    1125;    Bishop    v.  Pac.  547;  Fry  v.  Potter  (1880),  12 

Bishop  (1886),  54  Conn.  232,  6  Atl.  E.     I.    542,    Mechem's    Gas.     882; 

426;    McDonald   v.   Holmes    (1892),  Clarke  v.  Mills  (1887),  36  Kan.  393, 

22  Oreg.  212,  29  Pac.  735;  Crossley  13  Pac.  569,  Mechem's  Cas.  884. 

v.  Taylor  (1882),  83  Ind.  337;  War-  76  Ses      Whitcomb      v.      Converse 

ring  v.  Arthur,  supra,  (1875),  119  Mass.  38,  20  Am.  Rep, 

173 


191] 


LAW   OF   PARTNERSHIP 


to  contribution,  may  be  the  right  of  the  other  partners  to  insist 
that  the  whole  of  a  charge,  loss  or  liability  shall  be  borne  by 
the  partner  by  whose  misconduct  it  was  caused.  In  the  earlier 
sections  of  this  chapter  it  has  been  pointed  out  that  each  partner 
owes  to  his  co-partner  the  performance  of  certain  duties,  like 
the  duty  to  act  in  good  faith  towards  his  partners,  to  keep  proper 
accounts,  to  exercise  reasonable  care  and  diligence,  to  observe 
the  terms  of  the  partnership  agreements,  and  so  on.  If  one 
partner  violates  any  one  of  these  duties  and  thereby  causes  loss 
or  liability  to  the  firm,  not  only  would  the  wrong  doer  be  en- 
titled to  no  contribution  if  the  consequences  should  fall  in  the 
first  instance  upon  him,  but  if  they  fall  upon  his  co-partners  in 
whole  or  in  part  they  may  insist  that  he  shall  bear  the  entire 
loss  and  indemnify  them  entirely  against  it.77 


311,  Mechem's  Gas.  692;  Henry  v. 
Jackson  (1865),  37  Vt.  431;  Scott 
v.  Bryan  (1887),  96  N.  Car.  289,  3 
S.  E.  235;  Sloan  v.  Gibbes  (1899), 
56  S.  Car.  480,  35  S.  E.  408,  76 
Am.  St.  E.  559;  Gross  v.  Davis 
(1888),  87  Tenn.  226,  11  S.  W.  92, 
10  Am.  St.  E.  635. 

See  also  Uniform  Partnership 
Act,  sec.  40 (d),  and  sec.  18 (a) 
quoted  above. 


77  See  Murphy  v.  Crafts  (1858), 
13  La.  Ann.  519,  71  Am.  Dec.  519, 
Mechem's  Gas.  275,  Gilm.  Gas.  438; 
McCoy  v.  Crossfield  (1909),  54  Oreg. 
591,  104  Pac.  423;  Yorks  v.  Tozer 
(1894),  59  Minn.  78,  60  N.  W.  846, 
28  L.  E.  A.  86,  50  Am.  St.  E,  395, 
Mechem  's  Gas.  278,  Gilm.  Gas.  440 ; 
Smith  v.  Loring  (1826),  2  Ohio  440; 
Kintrea  v.  Charles  (1865),  12 
Grant's  Ch.  (Up.  Can.)  123. 


174, 


CHAPTER  VIII. 

OF    DEALINGS    BETWEEN    PARTNERS    AND    WITH    THE    FIRM. 

§  192.  In  general.  §  196.  Dealings   between   firms   hav- 

193.  Dealings  between  partners.  ing  a  common  partner. 

194, 195.  Dealings     between     firm 
and  partner. 

§  192.  In  general. — Questions  may  arise  respecting  dealings 
had  between  the  partners  themselves  or  with  their  firms  but  not 
immediately  involving  third  persons.  These  cases  will  chiefly 
fall  under  one  of  three  heads :  Dealings  between  the  partners ; 
Dealings  between  the  firm  and  a  partner ;  and  Dealings  between 
firms  having  one  or  more  partners  in  common. 

§  193.  Dealing's  between  partners. — With,  respect  of  matters 
which  do  not  relate  to  or  involve  the  partnership,  partners  are, 
of  course,  as  free  to  deal  with  each  other  as  though  they  were 
not  partners.1  With  respect  of  matters  which  relate  to  the 
partnership  but  do  not  involve  partnership  dealings,  the  part- 
ners may  also  freely  deal  with  one  another.  Thus,  for  example, 
one  may  borrow  from  another  the  money  he  is  to  contribute 
to  the  partnership  capital  or  buy  from  another  the  interest  in 
property  which  he  is  to  put  into  the  partnership,  and  the  obli- 
gations so  incurred  may  be  enforced  in  the  same  manner  as 
though  no  partnership  existed.2  So,  even  though  the  matter 

1  Thus  one  partner  may  make  an-  Mich.  398,  55  N.  W.  987,  Mechem  's 

other  his  agent  with  reference  to  Cas.  904;  Bull  v.  Coe  (1888),  77  Cal. 

the  former's  private  business  af-  54,  18  Pae.  808,  11  Am.  St.  R.  235, 

fairs  and  the  case  is  in  no  way  af-  Mechem 's  Cas.  905;  Bates  v.  Lane 

fected  by  the  fact  that  they  are  (1886),  62  Mich.  132,  28  N.  W. 

partners  as  to  other  matters.  See  753;  Bright  v.  Carter  (1903),  117 

Paine  v.  Moore  (1844),  6  Ala.  129;  Wis.  631,  94  N.  W.  645;  Hoskins 

Volk  v.  Roche  (1873),  70  111.  297.  v.  Dickinson  (1900),  124  Mich.  11, 

2 See   Cook  v.   Canny    (1893),   96  82  N.  W.  660. 

175 


§  194]  LAW   OP   PARTNERSHIP 

be  one  directly  involving  partnership  affairs,  the  partners  may, 
so  far  as  their  obligations  to  each  other  are  concerned,  make 
practically  any  lawful  agreement  which  they  please.  Thus  one 
may  assume  and  agree  to  pay  a  particular  firm  debt  or  portion 
of  the  firm  debts  and  hold  his  co-partner  harmless  therefrom ; 8 
one  may  sell  or  assign  to  the  other  all  his  interest  in  specific 
property  or  assets  of  the  firm ; 4  they  may  agree  among  them- 
selves as  to  the  manner  in  which  the  partnership  duties  or  labor 
shall  be  distributed,6  or  how  or  how  not  the  partnership  funds 
or  credits  shall  be  employed ; 6  and,  in  general,  they  may  segre- 
gate any  portion  of  the  partnership  affairs  and  make  it  the 
subject  of  a  special  agreement  which  is  to  control  as  between 
themselves." 

§  194.  Dealing's  between  firm  and  partner. — Although,  as  has 
been  seen,  the  firm  is  not  a  legal  entity,  it  is  constantly  recog- 
nized that  there  may  be  dealings  between  a  partner  and  his 
firm  in  its  collective  capacity.  Thus  a  partner  may  sell  or  lease 
property  or  loan  money  to  the  firm;  and,  on  the  other  hand, 
he  may  buy  or  rent  property  from  the  firm  or  borrow  money 
from  it.7  And  though,  as  will  be  seen,  there  may  be  difficulty, 
in  many  cases,  in  enforcing  claims  so  arising  by  an  action  at 
law  because  of  the  necessity  of  the  partner  being  both  a  plaintiff 
and  defendant,8  yet  they  may  be  enforced  in  equity  in  actions 
for  an  accounting,  and  they  may  often  be  so  assigned  to  third 

3  See      Edwards      v.      Eemington  chem's    Gas.    275,    Gilm.    Cas.    438; 
(1881),  51  Wis.  336,  8  N.  W.  193,  McCoy  v.  Crossfield  (1909),  54  Oreg. 
Mechem's  Cas.  907.  591,  104  Pae.  423. 

4  See  Beede  v.  Fraser  (1894),  66  V  See       Carpenter      v.       Greenop 
Vt.  114,  28  Atl.  880,  44  Am.  St.  E.  (1889),  74  Mich.  664,  42  N.  W.  276, 
824,  Mechem's   Cas.  300;    Shurtleff  4  L.  R.  A.  241,  16  Am.  St.  E.  662, 
v.  Willard  (1837),  19  Pick.  (Mass.)  Mechem's  Cas.   296;    Henry  v.  An- 
202;   Coggsehell  v.  Munger   (1893),  derson    (1881),   77  Ind.  361;   Allen 
54  Mo.  App.  420;   Holt  v.  Howard  v.    Anderson    (1883),    13    111.   App. 
(1903),  77  Vt.  49,  58  Atl.  797.  451;   Lassiter  v.  Stainback   (1896), 

5  See  Miller  v.  Freeman    (1900),  119  N.  Car.  103,  25  S.  E.  726. 
Ill  Ga.  654,  36  S.  E.  961,  51  L.  E.  8  See  post,  §  199. 

A.   504,  Mechem's   Cas.   894.  Even  though  the  creditor  partner 

6  See  Murphy  v.  Crafts  (1858),  13       might  not  be  able  to  sue,  he  might, 
La.  Ann.  519,  71  Am.  Dec.  ,519,  Me-       in  many  cases,  pay  himself  out  of 

176 


DEALINGS   BETWEEN    PARTNERS  [§  195 

parties  as  to  enable  the  latter  to  enforce  them  at  law  even  though 
the  assignor  might  not  be  able  to  do  so.9  Where,  in  such  deal- 
ings, the  firm  gives  its  negotiable  promissory  note  to  a  partner, 
or  the  partner  gives  one  to  the  firm,  the  cases  are  numerous  in 
which  the  actual  and  bona  fide  transferee  of  the  note  has  been 
permitted  to  sue  at  law.10  The  giving  of  such  a  note  by  the 
firm  to  a  partner,  payable  at  a  time  prior  to  any  agreed  or 
probable  termination  of  the  partnership,  would  be  strong  evi- 
dence of  an  intention  to  segregate  that  item  from  other  part- 
nership accounts  and  make  it  an  independent  obligation.11 

How  the  partner  creditor  would  stand  in  competition  with 
the  general  creditors  of  the  firm  who  were  not  partners,  is  a 
question  for  later  consideration.12 

§  195.  Whether  money  advanced  by  a  partner  to  or  for 

the  firm  is  to  be  regarded  as  a  loan  or  as  a  permanent  addition 
to  capital,  is,  when  not  made  clear  by  some  express  agreement, 
frequently  a  question  difficult  to  decide.  It  depends  largely  upon 
intention,  to  be  deduced  often  from  facts  and  circumstances.18 
The  imporfance  of  the  question  arises  chiefly  from  the  stand- 
point of  the  time  when  it  is  to  be  repaid,  e.  g.,  on  demand  or  at 

partnership  funds.     See  Cambre  v.  Seaver  (1853),  65  Mass.  (11  Gush.) 

Lasseigne    (1913),    134  La.   94,    63  314;  Eoger  Williams  Nat.  Bank  v. 

So.   680.  Hall   (1893),  160  Mass.  171,  35  N. 

9  Whether    an    assignee    may    en-  E.  66    (may  prove  it  in  insolvency 
force  the   claim  will,  of  course,  be  proceedings). 

affected     by     such      questions     as  But,  contra,  that  he  takes  it  sub- 

whether    it    is    assignable,    whether  ject  to  the  partner's  disabilities,  see 

the    assignee   may    sue    in    his    own  Simrall    v.    O'Bannons    (1847),    46 

name,  whether  he  takes  subject  to  Ky.  (7  B.  Mon.)   608. 

partnership  equities,  etc.  As    to    rights    of    transferee    to 

10  See  Carpenter  v.  Greenop,  supra;  whom     the    note     was     transferred 
Jennings  v.  Pratt  (1899),  19  Utah  merely    to   enable   him   to   sue,   see 
129,    56    Pac.    951;    Wintermute    v.  Wintermute   v.   Tarrant    (1890),   83 
Torrent    (1890),    83    Mich.    555,   47  Mich.   555,   47  N.   W.  358;   Cutting 
N.  W.   358;    Woodman   v.   Boothby  v.  Daigneau  (1890),  151  Mass.  297, 
(1876),  66  Me.  389;  Walker  v.  Wait  23  N.  E.  839,  cited  post,  §  200. 
(1878),  50  Vt.  668;  Knaus  v.  Giv-  11  See      Carpenter      v.      Greenop, 
ens   (1892),  110  Mo.  58,  19  S.  W.  supra;  Temple  v.  Seaver,  supra. 
535;    Buchanan  v.  Mechanics',  etc.,  12  See  post,  §451. 

Institution    (1896),  84  Md.  430,  35  13  See       Topping       v.       Paddock 

Atl.  1099,  Burd.  Gas.  298;  Temple  v.       (1879),  92  111.  92. 
Mech.  Part. — 12  177 


§  196]  LAW  OP  PARTNERSHIP 

at  the  expiration  of  a  reasonable  time,  or  only  when  other  capital 
is  repaid  upon  a  final  termination  of  the  firm.14  It  may  also 
involve  the  question  of  the  right  to  interest  upon  the  amount.16 
Partners  may  not  force  advances  upon  the  firm  or  charge  their 
copartners  for  disbursements  rendered  necessary  only  by  their 
own  default  or  made  in  violation  of  partnership  agreements  and 
not  assented  to  by  those  sought  to  be  charged.16 

§  196.  Dealings  between  firms  having  a  common  partner. — 

As  there  may  be  dealings  between  a  firm  and  a  partner,  so  there 
may  be  dealings  between  two  firms  having  one  or  more  partners 
in  common.  Thus  one  firm  may  sell  to  or  buy  of  the  other,  or 
lend  to  or  borrow  money  from  the  other.17  These  obligations, 
however,  as  in  the  former  case  are  subject  to  the  disability  that, 
owing  to  technical  rules  concerning  parties,  the  members  of  the 
one  firm  cannot  sue  the  members  of  the  other  at  law.18  As  will 
be  seen,  however,  equity  .will  often  take  jurisdiction,19  and  under 
the  reformed  procedure  in  many  States  the  common  law  objec- 
tion has  been  removed.20  In  many  cases  also  the  difficulty  may 
be  overcome  by  assigning  the  claim  to  a  third  person.21 

14  See  post,  §464  et  seq.  (1896),  92  Va.  540,  24  S.  E.  226; 

15  See  ante,  §182.  Taylor  v.  Thompson  (1903),  176  N. 

16  See  McFadden  v.  Leeka  (1891),  Y.  168,  68  N.  E.  240  (an  action  for 
48  Ohio  St.  513,  28  N.  E.  874,  Me-  deceit). 

chem's  Gas.  280.  In  Bosanquet  v.  Wray  (1815),  6 

See    also    Magilton    v.    Stevenson  Taunt.    597,  Ames'   Cas.   442,  it  is 

(1896),   173  Pa.   560,  34  Atl.   235,  said  that  no  legal  contract  can  exist 

where    the   amount    that    defendant  in  such  a  case,  "the  parties  could 

partner   could    be   made    liable    for  only  so  far  enter  into  this  contract 

was  limited  by  the  articles  of  part-  as  to  render  it  available  in  equity. ' ' 

nership.  19  See  post,  §233;   Cole  v.  Reyn- 

17  See    Bolton    v.    Puller    (1796),  olds,     supra;     Crosby     v.     Timolat 
1  Bos.  &  Pul.  539,  Burd.  Cas.  187;  (1892),    50    Minn.    171,    52    N.    W. 
Bonwit  v.  Heyman  (1895),  43  Neb.  526;   Noyes  v.  Ostrom    (1910),  113 
537,  61  N.  W.  716.  Minn.   Ill,  129  N.  W.  142;   Eogers 

18  See  Green  v.  Chapman  (1854),  v.   Rogers    (1847),  40   N.   Car.   31; 
27  Vt.  236;  Beede  v.  Fraser  (1894),  Burrows  v.  Leech  (1898),  116  Mich. 
66  Vt.  114,  28  Atl.  880,  44  Am.  St.  32,  74  N.  W.  296,  5  American  Law 
B.  824,  Mechem's  Cas.  300;  Cole  v.  Review  47. 

Reynolds  (1858),  18  N.  Y.  74,  Me-          20  See  dole  v.  Reynolds,  supra. 
chem's  Cas.  293;  Aylett  v.  Walker          21  See  Beacannon  v.  Liebe  (1884), 

178 


DEALINGS    BETWEEN    PARTNERS  [§  196 

Other  disabilities  will  also  suggest  themselves,  as,  for  example, 
that  the  members  of  the  creditor  firm  might  not  compete  with 
the  general  creditors  of  the  debtor  firm  in  securing  payment  out 
of  the  assets  of  that  firm,22  as  suggested  in  the  second  section, 
preceding. 

11  Oreg.  443,  5  Pae.  273.     Contra,         22  See  Bonwit  v.  Heyman,  supra. 
where  the  assignee  stands  merely  in 
the  position  of  the  assignor:  Aylett 
v.  Walker,  supra. 


179 


CHAPTER  IX. 


OF  ACTIONS  BETWEEN  PAKTNEKS. 


S 197.  Of   actions   between  partners 
in  general. 

I.  ACTIONS  AT  LAW. 
198.  In    what   cases   the    question 
arisea. 

1.  Partner  against  Firm. 
199, 200.  One   partner  cannot    sue 

the  firm  at  law. 

2.  Firm  against  Partner. 
201, 202.  Firm     cannot     sue     one 

partner  at  law. 

3.  Partner  against  Partner. 

203.  One    partner   cannot   sue   an- 

other at  law  on  claims  in- 
volving partnership  trans- 
actions. 

204.  Keason  for  the  rule. 

205.  When  rule  does  not  ap- 
ply— Single    completed 
transaction. 

206.  When  relation  was  not  a 

partnership  —  Joint        ven- 
tures. 

207.  One    partner    may    sue     an- 

other at  law  upon  claim 
connected  with  but  not  con- 
stituting partnership  trans- 
actions. 

208.  As      for     not     forming 

partnerships  as  agreed. 

209.  Or    for    dissolving    con- 
trary to  agreement. 

fclO.  Or    for    not    furnishing 

capital  as  agreed. 


§211.  Or   for  not  reimbursing 

for  capital  advanced. 

212.  Or  for  not  indemnifying 

as  agreed. 

213.  Or  for  not  paying  debts 

assumed. 

214.  One  partner  may  sue  another 

for  breach  of  partnership 
agreement. 

215.  One  partner  may  sue  another 

for  wrongful  practices  re- 
sulting in  loss. 

216.  One  partner  may  sue  another 

for  fraud  in  inducing  or  in 
settling  the  partnership, 
etc.  .*• 

217.  One  partner  may  sue  upon  a 

partnership  transaction  by 
agreement  transformed  into 
individual  one.  > 

218.  On     matters     distinct     from 

(  partnership      one      partner 
may  sue  another,  f 

4.  Firm   against  Firm   having 
Common  Partners. 

219.  One  firm  cannot  sue  another 

at  law  if  there  is  a  common 
partner. 

220.  Assignee — Code. 

II,  OF  ACTIONS  IN  EQUITY. 

221.  Equity  the  proper  tribunal  in 

partnership  matters. 


1.  Specific  Performance. 
222-225.  In  what  cases  granted. 


180 


ACTIONS   BETWEEN   PARTNERS  [§§197,198 

2.  Of  Injunctions.  4.  Of  Receivers. 

§  226.  In  what    cases   granted.  §  23l.  When  will  be   appointed. 

3.  Of  Accounting  and  Dissolution.  232'  p°wers    and    duties    of    re- 

CGlVGr 

227,  228.  In  what  cases  granted — 

Accounting   without   a   dis- 

,   ..  5.  Actwn      by      One      Partnership 

solution. 

,T  ,  „  ,     ,  Against  Another  Having  Com- 

229.  Nature  of  remedy  by  ac- 

, .         ,„,    ,    .     ,    ,   ,  mon  Partners. 

counting — What  included. 

230.  Who    may    demand    ac-         233.  Jurisdiction  of  equity. 

counting. 

§  197.  Of  actions  between  partners  in  general. — The  question 
of  the  remedies  which  partners  may  have  between  themselves 
involves  several  considerations  of  interest  and  importance.  Cer- 
tain of  the  rules  applicable  result  from  the  peculiar  relations 
between  the  parties,  and  others  from  the  peculiar  nature  of  the 
interests  involved.  As  has  been  already  seen,  while  the  law 
for  some  purposes  regards  the  firm  as  a  distinct  entity,  for  most 
purposes  the  partners  must  be  regarded  as  individuals.  This  is 
usually  the  rule  as  respects  actions  at  law.  If,  therefore,  one 
partner  would  maintain  an  action  against  the  partnership,  he 
must  sue  himself  as  a  partner  with  the  others.  If  he  should 
recover  judgment  against  the  firm,  he  might  be  called  upon  as 
a  member  of  the  firm  to  pay  or  satisfy  his  own  judgment.  If 
he  bases  an  action  upon  his  interest  in  the  partnership,  it  will 
usually  require  an  accounting  and  settlement  to  determine  what 
his  interest  is.  The  same  difficulties  would  usually  exist  if  the 
firm  were  to  sue  one  partner.  These,  and  other  like  considera- 
tions, have  led  to  the  establishment  of  certain  rules  respecting 
the  remedies  of  partners  as  between  themselves  which  require 
examination. 

"I.  ACTIONS  AT  LAW. 

§198.  In  what  cases  the  question  arises. — The  question  of 
the  right  to  maintain  an  action  at  law  respecting  partnership 
transactions  may  arise  in  four  classes  of  cases:  1.  Where  the 
claim  is  by  one  partner  against  the  partnership;  2.  Where  the 
claim  is  by  the  partnership  against  a  partner;  3.  Where  the 
claim  is  by  one  partner  against  one  or  more  of  his  fellow-part- 

('  181 


§  199]  LAW  OF  PARTNERSHIP 

ners;  and  4.  "Where  the  claim  is  between  firms  which  have  one 
or  more  partners  in  common. 

1.  Partner  Against  Firm. 

§  199.  One  partner  cannot  sue  the  firm  at  law. — 1.  One  part- 
ner cannot  maintain  an  action  at  law  against  the  partnership 
of  which  he  is  a  member  to  recover  upon  any  claim  which  he 
may  have  against  the  partnership  as  such.  The  objections  are 
of  two  sorts,  First,  there  is  the  difficulty  as  to  parties.  The 
claimant  is  himself  a  member  of  the  partnership  against  which 
he  makes  the  claim,  and  if  he  should  sue  the  partnership  he 
must  sue  himself  as  one  member  of  it.  To  be  thus  both  plaintiff 
and  defendant  involves  an  inconsistency  which  the  common  law 
procedure  does  not  permit.  Secondly,  there  is  the  difficulty  as 
to  the  nature  of  the  claim.  The  claimant  contends  that  the 
firm  owes  him.  It  is,  however,  ordinarily  impossible  for  him 
to  show,  without  a  final  settlement  of  its  accounts,  whether  the 
firm  really  owes  him  or  not.  There  may  be  counterclaims  of 
such  extent  that  a  final  balance  would  prove  him  to  be  the  debtor ; 
and  to  reach  this  final  balance  the  remedies  of  the  common  law 
are  usually  not  adequate. 

He  may  not  sue  his  partners  only  (not  joining* himself  as  a 
defendant),  for  they  alone  do  not  owe  the  debt  to  him.  He  may 
not  sue  them  only,  for  a  pro  rata  part,  for  that  would  involve 
an  accounting  of  that  transaction  alone,  without  reference  to 
other  transactions  which  might  affect  the  result. 

One  partner,  therefore,  may  not  sue  his  partnership  at  law  to 
recover  for  his  services  where  there  is  an  agreement  to  pay; 
or  to  recover  for  advances  or  loans  which  he  has  made  to  the 
firm,  or  for  money  which  he  has  paid  out  on  its  account,  or  for 
goods  which  he  has  sold  to  the  firm,  or  for  the  rent  of  premises 
which  he  has  leased  to  the  firm.1  In  all  these  and  like  cases, 

ISee  King  v.   Moore    (1904),   72  O'Brien  v.  Smith    (1889),  42  Kan. 

Ark.  469,  82  S.  W.  494;  Newby  v.  49,  21  Pac.  784;   Remington  v.  Al- 

Harrell    (1888),    99    N.    C.    149,    6  len    (1871),   109   Mass.   47;    Mickle 

Am.  St.  R.  503,  5  S.  E.  284;  Duff  v.  Peet   (1875),  43  Conn.  65;   Pico 

v.  Maguire   (1868),  99   Mass.   300;  v.  Cuyas  (1873),  47  Gal.  174. 

182 


ACTIONS  BETWEEN  PARTNERS  [§  200 

the  remedy  of  the  partner,  as  will  be  seen,  is  to  go  into  a  court 
of  equity,  praying  for  an  accounting  and,  usually,  for  a  dis- 
solution. 

§  200.  Of  the  two  difficulties  which  thus  lie  in  the  way 

of  the  action  at  law  the  first,  that  is,  the  difficulty  as  to  parties, 
is  a  constant  one  as  long  as  the  partner  himself  is  the  plaintiff. 
The  second  difficulty,  i.  e.,  the  difficulty  as  to  the  nature  of  the 
claim.,  however,  is  not  a  constant  one.  It  may  be  that  in  a  par- 
ticular case*  the  claim  is  a  single  and  simple  one  which  could 
be  easily  proved  without  involving  a  partnership  account- 
ing, or  it  may  be  that  the  firm  has  so  far  segregated  this  claim 
from  the  other  partnership  affairs  that  it  could  be  shown  with- 
out reference  to  the  state  of  the  final  accounting.  This  latter 
fact,  however,  would  not  save  the  case,  so  long  as  the  objection 
as  to  parties  remains. 

The  objection  as  to  parties  only  might  often  be  avoided  by 
assigning  the  claim  to  a  non-partner  who  might  then  sue  all 
of  the  partners.  Whether,  however,  the  assignment  would  avoid 
the  second  difficulty  as  to  the  nature  of  the  claim,  would  de- 
pend upon  the  circumstances.  If  the  claim  were  either  of  the 
single  and  simple  or  of  the  segregated  sort  so  that  no  investiga- 
tion of  a  complicated  partnership  account  would  be  necessary, 
and  the  jurisdiction  were  one  permitting  an  assignee  to  sue  in 
his  own  name,  the  assignee  of  the  partner  might  usually  sue 
at  law.2  If,  on  the  other  hand,  these  latter  things  were  not  so, 

2 See  Frank  v.  Anderson  (1884),  Knaus  v.  Givens  (1892),  110  Mo. 
81  Tenn.  695.  Where  a  partner  58,  19  S.  W.  535;  Buchanan  v.  Me- 
loans  money  to  the  firm  and  takes  chanies  Inst.  (1896),  84  Md.  430, 
the  firm's  note,  the  note  is  valid,  35  Atl.  1099);  though  this  would 
though  the  partner  himself  cannot  not  be  the  result  if  the  transfer  "were 
sue  upon  it,  and  if  he  indorses  to  a  merely  colorable  to  enable  the  trans- 
holder  for  value,  the  latter  may  re-  feree  to  sue  (Wintermute  v.  Tarrant 
cover  of  the  firm  (Carpenter  v.  (1890),  83  Mich.  555,  47  N.  W.  358; 
Greenop  (1889),  74  Mich.  664,  42  Cutting  v.  Daigneau  (1890),  151 
N.  W.  276,  16  Am.  St.  E.  666,  4  L.  Mass.  297,  23  N.  E.  839) ;  or  if  the 
E.  A.  241,  Mechem's  Cas.  296,  Gilm.  note  were  so  transferred  that  the  ac- 
Cas.  467;  Walker  v.  Wait  (1878),  tion  must  be  brought  in  the  name 
50  Vt.  668;  Jennings  v.  Pratt  of  the  assignor.  Davis  v.  Merrill 
'.1899),  19  Utah  129,  56  Pac.  951;  (1883),  51  Mich.  480,  16  N.  W.  864. 

183 


§§  201,  202]  LAW  OF  PARTNERSHIP 

the  assignee  would  stand  in  no  better  situation  than  the  partner 
himself  and  he  usually  could  not  sue  at  law.8 

2.  Firm  Against  Partner. 

§201.  Firm  cannot  sue  one  partner  at  law. — 2.  For  similar 
reasons,  the  partners  as  such  cannot  sue  one  partner  at  law  to 
recover  upon  a  claim  made  against  him  by  the  firm.  The  same 
difficulty  of  parties,  and  the  same  uncertain  character  of  the 
claim,  exist  as  where  the  situation  is  reversed,  as 'seen  in  the 
preceding  section.* 

Thus,  the  partners  as  such  cannot  maintain  an  action  at  law 
against  one  partner  to  recover  for  goods  sold  to  him  by  the 
firm,  or  for  the  recovery  of  money  due  from  him  to  the  firm 
upon  his  note  or  otherwise,  though  a  bona  fide  indorsee  of  the 
note  might  sue.5 

The  same  general  considerations  respecting  an  assignment  of 
the  claim  by  the  firm  to  a  nonpartner  and  the  right  of  the  latter 
to  sue,  would  apply  as  in  the  preceding  case  of  the  partner 
against  the  firm.6 

§202.  The  difficulty  as  to  parties,  however,  in  these 

cases,  has  been  held  to  be  confined  to  the  state  of  the  parties 
upon  the  record.  Thus  where  a  partner  gave  his  note  to  an- 
other partner,  but  the  latter  was  really  trustee  for  the  part- 
nership, it  was  held  that  the  payee  might  maintain  an  action 
at  law  against  the  maker,  although  the  recovery  was  for  the 
benefit  of  the  partnership  and  if  all  the  partners  had  been  nec- 
essary parties  plaintiff  the  action  could  not  have  been  main- 
tained.7 

On  the  other  hand,  statutory  or  other  requirements  that  all 

3  See  Bullard  v.   Kinney    (1858),       8  N.  H.  233,  29  Am.  Dec.  650,  Gilm. 
10  Gal.  60,  Mechem's  Cas.  288.  Cas.  454;  Ivy  v.  Walker  (1880),  58 

Compare  Simrall  v.  0  'Bannons  Miss.  253 ;  Summerson  v.  Donovan 
(1847),  46  Ky.  (7  B.  Mon.)  608.  (1910),  110  Va.  657,  66  S.  E.  822, 

4  See      Woodman      v.      Boothby      19  Ann.  Cas.  253. 

(1876),  66  Me.  389.  6  See  Woodman  v.  Boothby,  supra. 

6  See  Parker  v.  Macomber  (1836),  7  See  Van  Ness  v.  Forrest  (1814), 

18  Pick.  (Mass.)  505;  Bank  v.  Del-  12  U.   S.   (8  Cranch)    30,  3  L.  ed. 

afield  (1891),  126  N.  Y.  410,  27  N.  478. 
E.    797;    Burley   v.  Harris    (1836), 

184 


ACTIONS   BETWEEN   PARTNERS  [§  203 

actions  shall  be  prosecuted  in  the  names  of  the  real  parties  in 
interest,  might  destroy  the  force  of  the  position  referred  to  in 
the  preceding  paragraph. 

3.  Partner  Against  Partner. 

§203.  One  partner  cannot  sue  another  at  law  on  claim  in- 
volving partnership  transactions. — 3.  In  this  case  the  difficulty 
as  to  parties  does  not  arise.  By  the  hypothesis,  the  firm  is  not 
involved  as  a  party  on  either  side.  It  is  simply  one  partner 
against  another.  The  difficulty,  if  any,  arises  solely  from  the 
nature  of  the  claim  which  the  partner  is  seeking  to  enforce 
against  his  copartner.  That  claim  may  arise: — (a)  Out  of  part- 
nership transactions;  (&)  Out  of  matters  relating  to  the  partner- 
ship, but  not  constituting  partnership  transactions;  (c)  Upon 
matters  which  were  originally  partnership  transactions  but  which 
have  been  separated  and  segregated  by  special  agreement;  and 
(d)  Upon  matters  having  no  connection  with  the  partnership. 

a.  In  the  first  of  these  cases  the  claim  will  usually  be  that 
the  plaintiff  has  performed  labor  for  the  partnership,  or  has 
sold  goods  or  loaned  money  or  rented  property  to  the  partner- 
ship, or  has  advanced  or  paid  out  money  for  the  partnership,  as 
the  result  of  which  the  defendant  has  become  indebted  to  him; 
or  that  the  defendant  has  received  something  due  or  belonging 
to  the  partnership,  for  a  part  of  which  he  should  account  to  the 
plaintiff;  and  the  like.  As  to  this,  it  is  the  general  rule  that 
one  partner  cannot  sue  another  partner  at  law  upon  a  claim 
against  that  partner  arising  out  of  and  involving  partnership 
transactions,  unless  (1)  that  claim  has,  by  the  agreement  of 
the  parties,  been  in  some  way  segregated  and  taken  out  of  the 
domain  of  the  partnership  accounts;8  or  (2)  unless  the  part- 

8  See  post,  §  217 ;  Douthit  v.  or  promise) ;  Beede  v.  Fraser 
Douthit  (1892),  133  Ind.  26,  32  N.  (1894),  66  Vt.  114,  28  Atl.  880,  44 
E.  715  (where  the  court  says,  Am.  St.  B.  824,  Mechem's  Gas.  300 
"Where  there  is  an  agreement  ad-  (where  the  court  says,  "When  the 
justing  partnership  affairs,  and  that  parties  by  an  express  agreement  sep- 
agreement  awards  to  one  partner  a  arate  a  distinct  matter  from  the 
specific  sum,  or  creates  a  specific  partnership  dealing,  and  one  ex- 
duty  in  his  favor,  he  may  maintain  pressly  agrees  to  pay  the  other  a 
an  action  upon  a  breach  of  the  duty  specified  sum  for  that  matter,  as- 

185 


§  204]  LAW  OF  PARTNERSHIP 

nership  accounts,  at  least  so  far  as  that  claim  is  concerned,  have 
been  fully  settled,  and  a  final  balance  has  been  arrived  at  in 
his  favor,  or,  as  it  is  frequently  expressed,  unless  there  has 
been  an  account  stated  between  them.9  If  such  a  balance  has 
been  reached  in  his  favor,  then,  if  there  is  no  express  promise, 
the  law  will  usually  imply  a  promise  by  the  other  partner  to 
pay  it,  and  the  claim  becomes,  by  the  accounting  and  promise, 
so  far  transformed  from  a  partnership  liability  into  a  personal 
and  private  one,  that  the  partner  entitled  may  sue  the  partner 
obligated  in  an  action  at  law.10  Some  courts,  however,  require 
an  express  promise  to  pay  the  amount  found  due  and  do  not 
raise  an  implied  promise. 

§  204,  Reason  for  the  rule. — The  reason  for  the  general 

rule  denying  the  right  to  sue  at  law  is  that  it  is  ordinarily  im- 
possible to  determine  whether  the  defendant  partner  is  really 
indebted  to  the  plaintiff  partner  or  not,  until  the  partnership 
accounts  are  settled  and  the  true  standing  of  the  parties  as- 
certained ;  they  have  not,  by  implication,  agreed  to  account  other- 
wise; until  that  is  done  no  debt  arises;  and  the  process  and 
remedies  afforded  by  a  court  of  law  are  not  usually  adequate 
or  appropriate  to  the  investigation  of  claims  requiring  such  an 
accounting.11  Where,  however,  the  parties  themselves  have  made 

sumpsit  will  lie  on  the  agreement,  was  compelled  to  pay,  "held  to  make 

though  the  matter   arose  from  the  no    difference.      Sadler    v.    Nixon, 

partnership  dealing").  supra. 

9  See  Sadler  v.  Nixon  (1834),  5  10  See  Wycoff  v.  Purnell  (1860), 
B.  &  Ad.  936,  Ames  Gas.  453,  Gilm.  10  Iowa  332,  Mechem's  Gas.  286; 
Cas.  451;  Eemington  v.  Allen  Pope  v.  Eandolph  (1848),  13  Ala. 
(1871),  109  Mass.  47;  Holyoke  v.  214;  Spear  v.  Newell  (1841),  13 
Mayo  (1862),  50  Me.  385;  Harris  v.  Vt.  288,  Mechem's  Cas.  311;  Holy- 
Harris  (1859),  39  N.  H.  45;  John-  oke  v.  Mayo  (1862),  50  Me.  385; 
son  v.  Wilson  (1870),  54  111.  419;  Douthit  v.  Douthit,  supra;  Burns  v. 
Towle  v.  Meserve  (1859),  38  N.  H.  Nottingham  (1871),  60  111.  531, 
9;  Cobb  v.  Martin  (1912),  32  Okla.  Gilm.  Cas.  459  (must  be  a  final  bal- 
588,  123  Pac.  422;  Simpson  v.  Mil-  anee). 

ler  (1908),  51  Oreg.  232,  94  Pac.  11  In  Spear  v.  Newell,  supra,  the 
567.  court  in  going  over  the  list  of  corn- 
Fact  that  partner  suing  at  law  mon  law  actions  to  see  if  there  was 
for  contribution  to  a  debt  paid  by  one  applicable,  said  that  the  com- 
him  did  not  pay  it  voluntarily,  but  mon  law  action  of  account  would  not 

186 


ACTIONS   BETWEEN    PARTNERS  [§§205,206 

an  investigation  and  have  stated  the  result  showing  a  balance 
due  to  one  of  the  partners,  the  chief  objection  to  a  suit  at  law 
is  obviated  and  it  may  therefore  be  maintained. 

The  codes  of  procedure  have  not  in  general  changed  the  rule,12 
nor  is  it  dealt  with  by  the  Uniform  Partnership  Act. 

§205.  When  rule   does  not  apply — Single   completed 

transaction. — The  general  rule,  moreover,  has  been  held  not 
to  apply  where  the  partnership  was  a  special  one,  for  a  single 
and  finished  transaction  only,  or  where  all  of  the  partnership 
affairs  have  been  settled  except  a  single  transaction.13 

§  206.  When  relation  was  not  a  partnership — Joint  ven- 
tures.— So,  finally,  if  the  relation  in  question  was  not  that  of 
partnership,  any  rule  applicable  to  that  situation  only  would 
obviously  not  operate.  Thus  with  regard  to  those  situations 
which,  as  has  been  seen,14  are  sometimes  said  to  be  "joint  ven- 
tures" rather  than  partnerships,  it  has  been  held  in  a  number 
of  cases  that  actions  at  law  could  be  maintained  by  one  asso- 
ciate against  another,  arid  that  the  rule  applicable  to  partner- 
lie  since  (in  this  case)  the  defend-  Gilm.  Gas.  458;  Crittenden  v.  Cobb 
ant  had  received  nothing;  covenant  (1906),  156  Fed.  535;  Dorwart  v. 
would  not  lie  because  there  was  no  Ball  (1904),  71  Neb.  173,  98  N.  W. 
agreement  under  seal;  assumpsit  652;  Mills  v.  Gray  (1917),  50  Utah 
would  not  lie  because  there  was  no  224,  167  Pac.  358;  Feurt  v.  Brown 
liquidated  or  settled  balance.  (1886),  23  Mo.  App.  332;  Reiser  v. 

The  common  law  action  of  account  Johnston  (1917),  —  Okla.  — ,  166 
render  is  now  generally  obsolete  Pac.  723,  L.  R.  A.  191S  A.  924; 
though  it  seems  to  be  retained,  in  Ledford  v.  Emerson  (1905),  140  N. 
a  modified  form  at  least,  in  a  few  Car.  288,  52  S.  E.  641,  4  L.  R.  A. 
states.  (N.  S.)  130,  Gilm.  Gas.  456;  Mason 

12  See  Emery  v.  Pease  (1859),  20      v.    Sieglitz    (1896),    22    Colo.    320, 
N.  Y.  62.  44  Pac.  588,  Burd.  Gas.  537. 

13  See  Fry  v.  Potter  (1880),  12  R.          Court  of  equity  will  not,  it  is  said, 
I.  542,  Meehem's  Gas.  882;  Kutz  v.      take  jurisdiction  where  accounts  are 
Dreibelbis   (1880),  126  Pa.  335,  17       simple  and  may  therefore  be  settled 
Atl.    609;   Welch  v.   Miller    (1904),      at  law:  Lesley  v.  Rosson  (1860),  39 
210  Pa.  204,  59  Atl.  1065 ;  Wheeler      Miss.  368,  77  Am.  D.  679,  but  it  is 
v.    Arnold    (1874),    30    Mich.    304;       doubtful   if  this   was   a   case   of   a 
Clarke  v.  Mills  (1887),  36  Kan..  393,       partnership  at  all. 

13    Pac.    569,    Meehem's    Gas.    884,  14 See  ante,  §§  16,  43. 

187 


§§  207-209]  LAW  OF   PARTNERSHIP 

ship  did  not  prevent.16  A  number  of  cases,  however,  have  held 
actions  in  equity  permissible  in  such  cases.16 

§  207.  One  partner  may  sue  another  at  law  upon  claim  con- 
nected with  but  not  constituting  partnership  transactions. — 
&.  But  there  is  a  large  class  of  cases  involving  matters  which, 
though  they  may  in  some  way  be  connected  with  the  partner- 
ship, do  not  constitute  partnership  transactions,  but  are  indi- 
vidual transactions  between  particular  partners,  and  as  to  these 
an  action  at  law  may  often  .be  maintained.  It  is  the  character- 
istic of  these  cases  that  the  injury  is  to  the  partner  as  an  individ- 
ual and  not  to  the  firm  as  such.  Thus — 

§208.  -As  for  not  forming  partnership  as  agreed. — A 

breach  of  an  agreement  to  enter  into  partnership,  or  to  permit 
a  person  to  become  partner,  may  furnish  the  basis  of  an  action 
at  law,  because  here,  though  a  partnership  was  contemplated, 
it  was  never  created,  and  there  can  consequently  be  no  partner- 
ship transactions  involved,  and  no  necessity  for  an  accounting.17 

§209.  -Or  for  dissolving  contrary  to  agreement. — For 

like  reasons,  an  action  at  law  may  be  maintained  by  one  partner 
to  recover  damages  against  another  who  has  dissolved  the  part- 
nership in  violation  of  his  agreement  that  it  should  continue 
for  a  definite  term.18 

IB  See    Clark    v.    Sidway    (1891),  performed   under   an   agreement   to 

142  TJ.  S.  682,  12  S.  Ct.  327,  35  L.  launch    a    partnership:    Lawson    v. 

ed.  1157;  Bruce  v.  Hastings  (1868),  Glass    (1881),   6  Colo.   134. 

41  Vt.  380,  98  Am.  Dec.  592;  Jor-  18  See  Farwell  v.  Wilcox   (1918), 

dan  v.  Soule  (1887),  79  Me.  590,  12  —  Okla.  — ,  175  Pac.  936,  4  A.  L.  E. 

Atl.     786,     Haven     v.     Mchlgarten  156,  and  note;  McCollum  v.  Carlucci 

(1857),  19  111.  91.  (1903),  206  Pa.  312,  55  Atl.  979,  98 

16  See  ante,  §§16,  43,  note.  Am.    St.  R.    780;    Bagley   v.    Smith 

17  See  Hill  v.  Palmer   (1882),  56  (1853),  10  N.  Y.  489,  61  Am.  Dec. 
Wis.  123,  14  N.  W.  20,  43  Am.  Rep.  756,  Mechem's  Gas.  305;   Greenham 
703,   Mechem's   Gas.   303;    Treat  v.  v.  Gray  (1855),  4  Ir.  Com.  L.  501. 
Hiles    (1887),   68   Wis.   344,   32  N.  See,  also,  Ramsay  v.  Meade,  supra. 
W.  517,  60  Am.  R.  858.  Compare   Ryder   v.   Wilcox    (1869), 

See  also  Ramsay  v.  Meade  (1906),  103  Mass.  24. 

37   Colo.   465,   86   Pac.   1018.  See     also     Uniform     Partnership 

For  similar  reasons  an  action  at  Act,  sec.  38(2)  (b). 
law  will  lie  to  recover  for  services 

188 


ACTIONS   BETWEEN  PARTNERS  {§  210 

Such  an  action  does  not  necessarily  involve  an  investigation 
of  the  partnership  accounts.  It  might  be  maintained  although 
no  accounts  had  been  agreed  upon.  Damages  for  the  breach  of 
the  contract,  and  not  the  recovery  of  a  balance  due  upon  an 
account,  might  be  what  was  sought. 

The  Uniform  Partnership  Act  has  a  special  provision  for  se- 
curing the  payment  of  these  damages. 

§  210.  Or  for  not  furnishing  capital  as  agreed. — An  ac- 
tion at  law  may  be  maintained  by  one  partner  against  another 
to  recover  damages  for  the  loss  sustained  by  him — not  the  firm 
— because  of  the  latter 's  breach  of  his  agreement  with  the  former 
to  contribute  capital  or  furnish  goods  or  do  any  other  act  to 
start  or  launch  the  partnership.19  "An  agreement  to  pay  money 
or  to  furnish  stock,"  said  the  court  in  a  leading  case,20  "for  the 
purpose  of  launching  the  partnership,  is  an  individual  engage- 
ment of  each  partner  to  the  other,  and  the  defaulting  partner 
may  be  sued  in  an  action  at  law  upon  his  agreement.  It  is 
entirely  separate  and  distinct  from  the  partnership  accounts, 
and  this  forms  the  true  test  in  determining  whether  an  action 
at  law  will  lie  by  one  partner  against  his  copartner." 

By  the  hypothesis  here  the  agreement  is  an  individual  one 
with  the  plaintiff,  not  with  the  firm;  it  is  usually  made  before 
the  partnership  is  formed,  and  the  damages  to  be  recovered 
are  those  to  which  the  plaintiff  alone  is  entitled.  If  the  con- 
tract is  to  be  deemed  one  with  the  firm  and  for  its  benefit,  other 
considerations  apply  which  are  dealt  with  in  a  following  sec- 
tion.21 Moreover,  if  the  damages  sought  to  be  recovered  by  the 
plaintiff  partner  are  to  be  measured  by  the  profits  which  the 
firm  did  or  might  be  expected  to  make,  questions  as  to  their 

19  See  Crater  v.  Bininger  (1871),  20  Cook  v.  Canny  (1893),  96  Mich. 

45  N.   Y.   545;    Collamer  v.  Foster  398,  55  N.  W.  987,  Mechem's  Gas. 

(1854),    26    Vt.    754;     Morgan    v.  904,  Gilm.  Gas.  462.     To  like  effect: 

Nunes  (1877),  54  Miss.  308;  Terrill  Brown  v.   Tapscott   (1840),  6  Mees. 

v.  Kichards  (1817),  1  Nott  &  McC.  &  Wels.  119,  Ames'  Cases  468. 

(S.    Car.)     20 ;    Owen    v.    Meroney  21  See  post,  §  214. 
(1904),  136  N.  Car.  475,  48  S.  E. 
821,  103  Am.  St.  R.  952,  Gilm.  Cas. 
461. 

189 


§§211-213]  LAW   OF  PARTNERSHIP 

speculative  character  until  made  and  determined  by  an  account- 
ing, will  have  to  be  taken  into  consideration. 

§  211.  Or  for  not  reimbursing  for  capital  advanced. — 

If  one  partner  advances  money,  or  pays  for  goods,  or  furnishes 
any  other  thing,  at  the  request  of  the  other  to  enable  the  latter 
td  supply  his  portion  of  the  agreed  capital,  an  action  at  law 
will  lie  for  reimbursement.22 

Such  contracts  are  purely  personal,  and,  although  they  relate 
to  the  partnership,  they  in  no  way  involve  any  necessity  for 
investigating  the  partnership  accounts. 

§  212.  — —  Or  for  not  indemnifying  as  agreed. — If  one  part- 
ner agrees  with  another  to  pay  a  firm  debt  out  of  his  private 
funds  or  to  hold  the  other  harmless  from  liability  ,  by  reason 
of  any  partnership  transaction,  an  action  at  law  may  be  main- 
tained for  a  breach  of  the  agreement.23 

Such  an  agreement  has  ordinarily  the  effect  of  removing  the 
subject  matter  of  the  agreement  from  the  field  of  partnership 
affairs,  and  therefore  the  common  impediment  to  the  action  is 
itself  removed.  Stipulations  of  this  sort  are,  perhaps,  most 
frequently  made  upon  dissolution  of  the  firm,  but  they  may 
be  made  at  any  time  even  though  dissolution  is  not  then  im- 
minent or  contemplated. 

§  213.  Or  for  not  paying  debts  assumed. — For  similar 

reasons,  if  one  partner  upon  dissolution  agrees  to  pay  the  debts 
of  the  firm,  or  to  collect  the  debts  and  pay  over  a  share  of  the 

22 Bates  v.  Lane  (1886),  62  Mich.  Curran  (1895),  4  Idaho  573,  43  Pac. 

132,    28    N.    W.    753;    Bull    v.    Coe  559,  Burd.  Gas.  534.    Jones  v.  Kose 

(1888),  77  Cal.  54,  18  Pac.  808,  11  (1917),  81  W.  Va.  177,  94  S.  E.  41, 

Am.  St.  R.  235,  Meehem  's  Gas.  905 ;  seems  more  or  less  opposed. 
Smith    v.    Kemp    (1892),    92   Mich.          23 See  Coffee  v.  Brian   (1825),  3 

357,  52  N.  W.  639;  Scott  v.  Camp-  Bing.  54;    Miller  v.  Bailey   (1890), 

bell  (1857),  30  Ala.  728;  Sprout  v.  19  Oreg.  539,  25  Pac.  27;  Edwards 

Crowley   (1872),  30  Wis.  187;   Cur-  v.  Eemington    (1881),  51  Wis.  336, 

rier  v.  Eowe   (1865),  46  N.  H.  72;  8  N.  W.  193,  Meehem 's  Gas.   907; 

Newman  v.  Ruby  (1903),  54  W.  Va.  Kellogg   v.    Moore    (1881),    97    111. 

381,  46  S.  E.  172;  Elgie  v.  Webster  282. 
(1839),  5  M.  &  W.  518;  Haskins  v. 

190 


ACTIONS   BETWEEN   PARTNERS  [§  214 

collection,  an  action  at  law  may  be  maintained  if  the  agree- 
ment is  broken.24 

§214.  One  partner  may  sue  another  for  breach  of  partner- 
ship agreements. — Actions  at  law  may  also  be  maintained  by 
one  partner  against  another  to  recover  damages  for  a  loss  sus- 
tained by  him — not  by  the  firm — from  a  breach  of  such  stipula- 
tions or  agreements  in  the  partnership  articles  as  were  designed 
for  the  protection  of  the  partner  complaining,  as  upon  a  breach 
of  an  agreement  not  to  sign  the  firm  name  as  an  accommodation 
indorser,25  or  of  the  agreement  of  one  of  several  partners  to  per- 
sonally pay  a  portion  of  certain  moneys  to  be  advanced  for 
firm  use  by  the  plaintiff  partner,26  or  of  an  agreement  by  one 
partner  with  another  to  see  that  the  latter 's  contribution  to  the 
capital  is  returned  in  case  he  desires  to  withdraw,27  and  the 
like.28 

It  is  sometimes  very  difficult  to  determine  whether  the  cove- 
nant or  agreement  in  question  is  one  designed  for  the  benefit 
of  the  firm  or  only  of  the  plaintiff  partner  individually.  It  is 
only  where  the  latter  is  the  case — where  the  promise  is  to  him, 
where  the  damages  if  recovered  would  belong  to  the  plaintiff 
partner  personally  and  not  to  the  firm — that  this  action  will 
ordinarily  lie.29 

Even  in  the  former  case,  however,  if  the  transaction  in  ques- 
tion is  not  complicated  and  there  are  no  equities  arising  out 

24  See      Thropp      v.      Eichardson  27  See  Guccione   v.  Scott    (1897), 
(1890),  132  Pa.  399,  19  Atl.  218;  21  N.  Y.  Misc.  410,  47  N.  Y.  S.  475. 
Ferguson  v.  Baker    (1889),  116  N.  28 See  Glover  v.  Tuck   (1840),  24 
Y.  257,  22  N.  E.  400.  Wend.  (N.  Y.)  153. 

Compare     Shattuck     v.     Lawson          29  See  Miller  v.  Freeman   (1900), 

(1858),  76  Mass.  (10  Gray)  405.  Ill  Ga.  654,  36  S.  E.  961,  51  L.  R. 

25  See  Stone  v.  Wendover  (1876),  A.  504,  Mechem's  Gas.  894;  Ryder 
2    Mo.    App.    247;    Vance   v.    Blair  v.    Wilcox    (1869),    103    Mass.    24, 
(1849),  18  Ohio  532,  51  Am.  Dec.  Ames'    Gas.    455,    Burd.    Gas.    525;. 
467.  Capen  v.   Barrows    (1854),   1   Gray 

26  See  Wills  v.  Simmonds  (1876),  (Mass.)   376;  Buckmaster  v.  Gowen 
8  Hun  (N.  Y.)   189;  also  Madge  v.  (1876),  81  111.  153. 

Puig   (1877),  12  Hun  15    (reversed 
on  other  grounds,  71  N.  Y.  608). 

191 


§  215]  LAW  OF   PARTNERSHIP 

of  the  partnership  accounts,  no  sound  reason  is  apparent  why 
the  rights  of  the  parties  should  not  be  adjusted  at  law.30 

§215.  One  partner  may  sue  another  for  wrongful  practices 
resulting  in  loss. — And  the  same  rule  would  apply  where  one 
partner,  by  fraudulent  practices,  or  by  any  wrongful  act,  in 
violation  of  his  duty  as  a  partner,  should  impose  loss  upon  his 
partner,  not  upon  the  firm,  as  by  putting  on  him  a  personal 
loss  or  liability  by  giving  the  firm  note  without  authority  for 
his  private  debt,  31  or  by  ousting  his  partner  from  the  business,32 
or  by  injuring  the  individual  property  of  his  partner  used  in 
the  business,33  and  the  like.34 

It  must  be  kept  in  mind,  in  these  cases,  that  if  one  partner 
is  suing  his  copartner  or  a  stranger  for  acts  injuring  the  plain- 
tiff's interest  in  the  partnership  property,  he  may  fail,  not  be- 
cause of  the  fact  that  his  action  is  at  law  but  because  the  value 
and  extent  of  his  interest  may  not  be  capable  of  proof  until  it 
has  been  determined  by  an  accounting.35  The  same  distinction 
is  to  be  made  also  where  the  loss  is  primarily  to  the  firm  and 
not  merely  to  one  partner.  Thus  if  one  partner  wrongfully  dis- 
poses of  the  firm  property,  an  action  at  law  against  him  by  his 
copartner  to  recover  damages  may  be  hampered  not  only  by  the 
fact  that  they  are  co-owners  but  also  by  the  fact  that  the  extent 
of  the  plaintiff's  loss  may  not  be  capable  of  ascertainment  until 
there  has  been  an  accounting.36 

30  For     this     reason,     the    writer  33  See  Newby  v.   Harrell   (1888), 
ventures  to  question  the  soundness  99  N.  Car.  149,  5  S.  E.  284,  6  Am. 
of  Miller  v.  Freeman,  supra.  St.  R.  503. 

31  See    Calkins   v.    Smith    (1872),  34  See  Boughner  v.  Black  (1886), 
48  N.'T.  614,  8  Am.  Eep.  575;  Ful-  83  Ky.  521,  7  Ky.  L.  R.  562,  4  Am. 
ler   v.   Percival    (1879),    126   Mass.  St.  R.  174,  Mechem 's  Cas.  916. 
381.  35  See  Sindelare  v.  Walker  (1891), 

In  Calkins  v.  Smith,  supra,  Earl,  137  111.  43,  27  N.  E.  59,  31  Am.  St. 

J.,  holds  that  such  a  fraud  is  not  a  R.  353,  Mechem 's  Cas.  194;  Reed  v. 

fraud    upon    the    firm;    the    guilty  Gould  (1895),  105  Mich.  368,  63  N. 

partner    does   not    defraud    himself,  W.  415,  55  Am.  St.  R.  453. 

but  only  his  copartner  and  therefore  36  See  Wells   v.   Mitchell    (1841), 

the  action  is  an  individual  and  not  a  23   N.  Car.    (1  Ired.)    484,  35  Am. 

firm  action.  Dec.  757. 

32  See  Newsom  v.  Pitman  (1892),  These     considerations     have     fre- 
98  Ala.  526,  12  So.  412.  quently    been    applied    in    deciding 

192 


ACTIONS    BETWEEN   PARTNERS  [§§216,217 

§  216.  One  partner  may  sue  another  for  fraud  in  inducing  or 
in  settling  the  partnership,  etc. — So  an  action  at  law  will  lie 
to  recover  damages  for  misrepresentations  or  deceit  by  one  part- 
ner in  inducing  another  to  become  a  partner,37  or,  upon  dis- 
solution, to  take  as  his  share  of  the  partnership  assets  certain 
accounts  purporting  to  be  firm  credits,  but  which  had  been 
deceitfully  kept  or  created  by  the  other  partner.88 

§  217.  One  partner  may  sue  upon  a  partnership  transaction 
by  agreement  transformed  into  individual  one. — c.  And  even 
though  a  given  transaction  may  originally  have  been  a  partner- 
ship one,  it  is,  in  general,  true  that  the  partners  may,  by  special 
agreement,  isolate,  segregate  and  transform  a  partnership  trans- 
action into  the  individual  one  of  one  of  the  partners,  and  ujDon 
matters  thus  separated  from  the  partnership  affairs  an  action  at 
law  may  be  maintained.39 

Such  special  agreement  need  not  be  express  in  the  sense  that 
it  can  only  be  made  by  formal  words.  It  may  be  deduced  as 
the  natural  and  reasonable  inference  from  what  they  do.  Thus 

whether  one  partner  may  maintain  Mass.   444;    Kice  v.   Culver    (1880), 

an  action  at  law  against  another  for  32  N.  J.  Eq.  601 ;   Morse  v.  Hutch- 

a   conversion    of    partnership    prop-  ins  (1869),  102  Mass.  439. 

erty.     It  is   held   in   a   number   of  38  See       Crockett       v.       Burleson 

cases  that  he  may  not,  unless  there  (1906),  60  W.  Va.  252,  54  S.  E.  341, 

has  already  been  some  accounting  or  6  L.  E.  A.   (N.  S.)   263,  Gilm.  Gas. 

adjustment  determining  his  interest.  464.     Compare   McAuley   v.    Cooley 

See  Dukes  v.   Kellogg    (1900),  127  (1895),  45  Neb.  582,  63  N.  W.  871, 

Cal.  563,  60  Pac.  44;   Couilliard  v.  Burd.  Cas.  535. 

Eaton  (1885),  139  Mass.  105,  28  N.  39  See    Eyder    v.    Wilcox    (1869), 

E.  579;  Kiddell  v.  Ramsey   (1904),  103  Mass.  24,  Ames'  Cas.  455,  Burd. 

31  Mont.  386,  78  Pac.  597.  Cas.     525;     Purvines    v.     Champion 

Some  cases,  on  the  other  hand,  (1873),  67  111.  459;  Neil  v.  Green- 
have  permitted  such  actions,  espe-  leaf  (1875),  26  Ohio  St.  567;  Emery 
cially  where  the  partnership  was  v.  Wilson  (1879),  79  N.  Y.  78; 
ended,  the  transactions  few,  and  the  Howard  v.  France  (1871),  43  N.  Y. 
adjustment  not  complicated.  See  593,  3  Alb.  Law  J.  305;  Paine  v. 
Frith  v.  Thompson  (1918),  103  Kan.  Thatcher  (1841),  25  Wend.  (N.  Y.) 
395,  173  Pac.  915,  L.  E.  A.  1918  F  450;  Jackson  v.  Stopherd  (1834),  2 
1123;  Eeis  v.  Hellman  (1874),  25  Cr.  &  M.  361,  Ames'  Cas.  462,  Gilm. 
Ohio  St.  180.  Cas.  452. 

37  See  Hale  v.  Wilson  (1873),  112 

Mech.  Part.— 13  193 


§218] 


LAW   OF   PARTNERSHIP 


where  the  parties  specially  agree  upon  terms  whose  natural 
and  reasonable  result  is  to  segregate  a  particular  transaction, 
they  need  not  also  declare  in  words  that  this  is  their  intent.40 
One  of  the  most  common  of  these  cases  is  that  wherein  some  or 
all  of  the  partners  execute  and  deliver  to  one  partner  a  nego- 
tiable note  payable  at  a  date  prior  to  any  probable  termination 
of  the  partnership.  Its  earlier  maturity  tends  to  show  that  it 
was  not  designed  to  await  a  final  accounting  of  partnership 
affairs,  and  its  negotiable  character  tends  to  show  that  it  was 
to  be  payable  absolutely,  without  regard  to  the  state  of  the  part- 
nership accounts.41  Even  though  the  payee  might  not  be  able 
to  sue  at  law  upon  a  note  so  given  to  him  in  the  firm  name  (on 
account  of  the  difficulty  as  to  parties),  his  transferee  might  sue. 

§  218.  On  matters  distinct  from  partnership  one  partner  may 
sue  another. — d.  As  to  matters  entirely  distinct  from  the  part- 
nership affairs,  one  partner  may,  of  course,  sue  another  as  freely 
as  though  in  respect  to  other  matters  they  did  not  sustain  the 
Telation  of  partner.42 


40  Thus  the  making  of  a  promis- 
sory note  by  some  of  the  partners  in 
favor  of  another  is  said  to  be  an  ac- 
knowledgment of  the  separation  of 
that  sum  from  the  partnership  ac- 
count. Bonnafee  v.  Fenner  (1846), 
6  Smedes  &  M.  (Miss.)  212,  45  Am. 
Dec.  278.  See,  also,  Fox  v.  Firth 
(1842),  10  M.  &_W.  131;  Wilson  v. 
Wilson  (1894),  ~26  Oreg.  251,  38 
Pae.  185,  Burd.  Gas.  538. 

So,  where  upon  closing  up  the 
business,  it  was  agreed  that  one 
should  take  a  certain  lot  of  property 
and  pay  the  other  a  certain  sum  for 
his  interest  in  it:  Jackson  v.  Stop- 
herd,  supra.  So,  where  on  dissolu- 
tion, one  partner  bought  the  assets. 
He  may  later  recover  from  his 
former  partner  money  collected  by 
him  on  a  debt  due  the  firm.  Glade 


v.  White   (1894),  42  Neb.   336,   60 
N.  W.  556,  Burd.  Gas.  541. 

41  See      Carpenter      v.      Greenop 
(1889),  74  Mich.  664,  42  N.  W.  276, 
4  L.  B.  A.  241,  16  Am.  St.  E.  662, 
Mechem's  Gas.  296,  Gilm.  Gas.  467; 
Wilson  v.  Wilson   (1894),  26  Oreg. 
251,  38  Pac.  185,  Burd.  Gas.   538; 
Burnes  v.  Scott    (1885),  117  U.  S. 
582,  6  Sup.  Ct.  865,  29  L.  ed.  991. 
Compare      Martin      v.       Stubbings 
(1886),  20  111.  App.  381   [s.  0.  126 
111.  387,  18  N.  E.  657,  9  Am.  St.  E. 
620];    Sewell  v.   Cooper    (1869),  21 
La.  Ann.  582.     See,  also,  Conway  v. 
Zender    (1913),   154   Wis.  479,  143 
N.  W.  162. 

42  See  Elder  v.  Hood   (1865),  38 
111.  533;  Newsom  v.  Pitman  (1892), 
98  Ala.  526,  12  So.  412;  Paine  v. 
Moore  (1844),  6  Ala.  129. 


194 


ACTIONS   BETWEEN   PARTNERS  [§  219 

4.  Firm  Against  Firm  Having  Common  Partners. 

§  219.  One  firm  cannot  sue  another  at  law  if  there  is  a  com- 
mon partner. — 4.  In  the  absence  of  a  statute  regulating  it, 
one  firm  cannot  maintain  an  action  at  law  against  another  firm 
if  there  is  a  partner  common  to  both  firms,  since  such  common 
partner  would  have  to  be  both  a  plaintiff  and  a  defendant.43 
The  death  of  the  common  partner  will  not  remove  the  impedi- 
ment as  to  matters  arising  before  the  death,  nor  will  the  dis- 
solution of  the  firm.44  The  nature  of  the  claim  is  immaterial, 
if  it  is  an  obligation  in  favor  of  one  firm  and  against  the  other 
as  such.  The  forum  for  actions  in  such  cases  is  the  court  of 
equity.45 

It  is  not  permitted,  it  is  said  in  one  case,46  "that  one  of  the 
parties  should  thus  appear  both  as  a  plaintiff  and  defendant,  in 
effect  prosecuting  an  action  against  himself,  in  which,  if  a  re- 
covery were  to  be  allowed,  it  would  be  in  his  favor  and  at  the 
same  time  against  himself.  Nor,  at  law,  would  the  contract 
or  agreement  between  the  two  firms  having  a  common  member 
be  recognized  as  creating  a  legal  obligation  or  cause  of  action. 
The  transaction  would  be  treated  as  an  attempt  by  a  party  to 
enter  into  a  contract  with  himself.47  The  remedial  system  of 
the  common  law  was  too  inflexible  and  restricted  to  enable  it 
to  adjust  the  complex  rights  and  obligations  of  the  parties  under 
such  circumstances.  But  in  equity  the  agreements  of  the  mem- 
bers of  firms  so  related  to  each  other  were  treated  as  obligatory, 
and  the  fact  that  one  of  the  parties  to  the  joint  contract  stood 
in  the  position  of  both  an  obligor  and  obligee  did  not  stand  in 

43  See  Beede  v.  Eraser  (1894),  66  44  See  Bosanquet  v.  Wray  (1815), 

Vt.  114,  28  Atl.  880,  44  Am.  St.  E.  6  Taunt.  597,  Ames'  Gas.  442;  In  re 

824,  Mechem's   Gas.  300;    Green  v.  Buchhause    (1874),    2    Lowell    331, 

Chapman  (1855),  27  Vt.  236;  Denny  Gilm.  Gas.  572. 

v.  Metcalf  (1848),  28  Me.  389;  Hall  45  See  cases  cited  in  first  note, 

v.    Kimball     (1895),    77    III     161;  46  Crosby  v.  Timolat,  supra. 

Crosby  v.  Timolat  (1892),  50  Minn.  47  Citing    Bosanquet    v.    Wray,    6 

171,  52  N.  W.  526,  Gilm.  Gas.  469;  Taunt.   597;    De   Tastet  v.  Shaw,   1 

Noyes  v.  Ostrom   (1910),  113  Minn.  Barn.  &  Aid.  664,  669;  Leake,  Cont. 

Ill,  129  N.  W.  142;    Beacannon  v.  439,    440;     McFadden    v.    Hunt,    5 

Liebe  (1884),  11  Oreg.  443,  5  Pac.  Watts  &  S.  468;  Price  V.  Spencer,  7 

273.  Phila.  179. 

195 


§§  220-222]  LAW   OF  PARTNERSHIP 

the  way  of  affording  such  relief  or  remedy  as  might  be  found 
to  be  appropriate  and  necessary  to  the  ends  of  justice. ' ' 48 

§220.  — — Assignee — Code. — This  objection  might  in  many 
cases  be  obviated  by  assignment  where  the  assignee  could  sue  in 
his  own  name,  and  be  free  from  the  disabilities  affecting  the 
assignor!49  And  in  New  York  it  has  been  held  that  the  code 
of  procedure,  in  abolishing  the  distinctions  between  actions  at 
law  and  suits  in  equity,  had  made  it  possible  to  maintain  a 
"civil  action"  in  such  cases.60 

II.  OF  ACTIONS  IN  EQUITY. 

§  221.  Equity  the  proper  tribunal  in  partnership  matters. — 

The  court  of  equity  is  the  chief  and  appropriate  tribunal  for 
the  settlement  of  all  controversies  growing  out  of  partnership 
transactions  as  such.  Its  principal  function  is  in  winding  up 
the  partnership  affairs  and  arriving  at  the  respective  interests 
therein  of  the  partners  and  creditors,  but  its  aid  may  often  be 
sought  in  other  matters.  Thus — 

1.  Specific  Performance. 

§222.  In  what  cases  granted. — Something  of  the  power  of 
courts  of  equity  to  enforce  specific  performance  of  partnership 
agreements  has  been  already  considered  in  a  previous  section,51 
and,  as  there  noticed,  the  jurisdiction  is,  in  most  cases,  greatly 
limited  by  the  nature  of  the  case.62  But  such  stipulations  as 

48  Citing  1  Story,  Eq.  Jur.,  §§679,      290.      See,    also,    Gibson    v.    Ohio 
680;    Haven    v.    Wakefield,    39    111.      Farina  Co.  (1859),  2  Disney  (Ohio) 
509;    Chapman  v.   Evans,   44   Miss.      499,  13  Ohio  Dec.  306. 

113;  Calvit's  Ex'rs  v.  Markham,  3  51  See  ante,  §119. 

How.  (Miss.)  343;  Hayes  v.  Bement,  58 See  Scott  v.  Eayment    (1868), 

3  Sandf.  394.  L.  E.  7  Eq.  112;  Morris  v.  Peckham 

49  See  Beacannon  v.  Liebe,  supra.  (1883),    51    Conn.    128;     Clark    v. 
Not  in  Virginia:   Aylett  v.  Walker  Truitt  (1899),  183  111.  239,  55  N.  E. 
(1896),  92  Va.  540,  24  S.  E.  226.  683;     Buck    v.    Smith     (1874),    29 

60  See  Cole  v.  Eeynolds  (1858),  18  Mich.  166,  18  Am.  E.  84,  Mechem's 

N.  Y.  74,  Mechem's  Cas.  292;  Man-  Cas.  322;  Hercy  v.  Birch  (1804),  9 

gels  v.  Shaen   (1897),  21  App.  Div.  Ves.    357;     Karrick    v.    Hannaman 

507,  48  N.  Y.  S.  526,  Mechem's  Cas.  (1897),  168  U.  S.  328,  18  Sup.  Ct. 

196 


ACTIONS    BETWEEN   PARTNERS  [§223 

are  capable  of  specific  performance  may  be  enforced,  either 
directly,63  or  negatively  by  an  injunction  against  their  breach.64 
The  chief  objections  which  arise  to  the  exercise  of  the  power 
to  grant  specific  performance  in  partnership  cases  are  those 
which  inhere  in  the  peculiar  nature  of  the  subject.  The  cases 
which  involve  the  question  fall  usually  into  one  or  the  other 
of  two  classes :  First,  those  where  specific  performance  is  sought 
of  an  agreement  to  become  or  remain  partners;  and  Second, 
those  which  involve  some  incidental  right  or  liability  growing 
out  of  an  established  relation,  such  as  agreements  to  buy  or  sell, 
take  shares  on  a  valuation,  and  the  like.  The  cases  in  the  former 
class  are  the  more  difficult.  Thus,  where  the  purpose  is  to  compel 
parties  to  enter  into  partnership  as  agreed,  if  no  time  was  stipu- 
lated for  its  continuance,  of  what  avail  is  it  to  enforce  the  crea- 
tion of  a  partnership  which  the  parties  may  immediately  dis- 
solve ? — if  a  term  of  continuance  was  agreed  upon,  can  the  court 
assume  the  task  of  constantly  watching  the  parties  to  observe 
whether  they  are  performing  their  duties  as  partners  ? 

§  223.  Same  subject. — In  one  case  65  in  which  the  question 
arose,  the  court,  in  denying  the  application,  said:  "It  is  ex- 
tremely plain  that  the  court  cannot  assume  to  enforce  the  per- 
formance of  daily  prospective  duties,  or  supervise  or  direct  in 
advance  the  course  or  conduct  of  one  who  is  to  control  and 
manage  in  the  interest  of  a  firm  in  which  he  is  to  stand  as  a 
member,  and  where,  too,  the  stipulated  arrangement  as  plainly 
set  forth  contemplates  that  his  personal  skill  and  judgment  shall 

E.  135,  42  L.  ed.  484;  Hyer  v.  Rich-  53  Bee  cases  cited  in  second  and 

mond   Traction  Co.    (1897),   168  U.  third  sections  following. 

S.  471,  18  Sup.  Ct.  114,  42  L.  ed.  64  See  Leavitt  v.  Windsor  Land  & 

547;    Marble  Co.  v.  Eipley   (1870),  Inv.  Co.  (1893),  4  C.  C.  A.  425,  54 

10  Wall.  (U.  S.)  339,  19  L.  ed.  955.  Fed.  439. 

Compare  England  v.  Curling  (1844),  55  Buck  v.  Smith  (1874),  29  Mich. 

8    Beav.    129;    Somerby    v.    Buntin  166,  18  Am.  Eep.  84,  Mechem's  Gas. 

(1875),  118  Mass.  279,  19  Am.  E.  322,  Gilm.  Gas.  479.     The  court  in 

459,  Mechem's   Gas.-  326;    Byrne   v.  this  case  also  urged,  as  a  ground  for 

Eeid    [1902],  2   Ch.  735,  Mechem's  refusing  the  relief,  that,  under  the 

Gas.      930 ;      Birchett      v.      Boiling  contract  there  involved,  it  could  not 

(1817),  5  Munf.  (Va.)   442;  Wads-  make  its  relief  mutual, 
worth  v.  Manning  (1853),  4  Md.  59. 

197 


§  224]  LAW   OF   PARTNERSHIP 

be  applied  and  govern  according  to  the  shifting  needs  of  prop- 
erty and  business.  No  court  is  competent  to  execute  such  an 
arrangement." 

In  another  case,66  involving  the  same  question,  the  court  said : 
"It  is  a  rule  in  equity  that  the  court  will  not  decree  a  specific 
performance  where  it  has  no  power  to  enforce  the  decree.  Hence 
partnership  articles  will  not  be  enforced,  especially  where  no 
time  is  fixed  for  its  continuance,  as  either  party  may  dissolve  it 
at  pleasure.  And  even  where  a  time  is  fixed  it  is  difficult  to  see 
how  the  decree  can  be  enforced.  Take  this  case  as  an  illustra- 
tion :  Is  the  court  to  keep  its  hand  on  the  parties  for  seventeen 
years  and  compel  them  to  carry  on  this  business  ? ' ' 

§  224.  Same  subject. — There  may,  however,  be  cases  in  which 
the  court  will  enforce  specific  performance  of  an  agreement  to 
form  a  partnership,  by  requiring  the  execution  of  the  agreed  ar- 
ticles or  other  similar  act,  notwithstanding  that  it  may  be  im- 
mediately dissolved.  This  may  be  done,  for  example,  where  it 
will  secure  to  a  partner  the  interests  in  property  to  which  by 
the  partnership  agreement  he  is  entitled.57 

The  execution  of  such  deeds,  etc.,  as  might  be  necessary  to  give 
full  effect  to  the  agreement  would  fall  within  the  same  rule. 
The  act  required  here  is  a  certain,  definite  and  agreed  one,  which 
may  be  of  importance  to  the  protection  of  the  party's  interests 
and  which  may  in  some  cases  be  of  value  even  though  the  en- 
forcement of  the  remainder  of  the  agreement,  i.  e.,  to  carry  on 
the  partnership  so  formed  for  the  agreed  period  may  be  thought 
to  be  beyond  the  power  of  the  court.68 

56  Morris  v.  Peckham   (1883),  51  ment    "was    held    to    be    within    the 

Conn.  128.     Same:    Clark  v.  Truitt  power  of  the  court.    This  case,  how- 

(1899),  183  111.  239,  55  N.  E.  683.  ever,  was  in  fact  attended  by  a  cer- 

67  Somerby  v.  Buntin  (1875),  118  tain  consent  order  which  may  have 
Mass.  279,  19  Am.  E.  459,  Mechem  's  affected    the    question,    though    at 
Gas.   326;    Satterthwait  v.  Marshall  least   one   judge   intimated  that  he 
(1872),  4  Del.  Ch.  337;  Karrick  v.  would  have  been  of  the  same  opin- 
Hannaman,  supra.  ion  without  that  fact).     [See  com- 

68  See    Byrne   v.    Reid    [1902],    2  ments     3     Columbia     Law     Keview 
Ch.  735,  Mechem 's  Gas.  930   (where  108];  England  v.  Curling  (1844),  8 
the  execution  of  such  deeds  as  were  Beav.  129. 

necessary  to  give  effect  to  the  agree- 

198 


ACTIONS   BETWEEN   PARTNERS 


225 


§225.  Same  subject. — Aside  from  agreements  to  become  or 
remain  partners,  there  are  some  cases  relating  to  partnership  in 
which  specific  performance  may  be  had.  The  most  common  of 
these  are  those  involving  agreements  to  buy  or  sell  shares  upon 
death  or  other  dissolution,69  but  there  are  others.60  Agreements 
to  submit  disputed  claims  to  arbitration  are  more  difficult  of 
specific  enforcement,  but  not  usually  for  reasons  which  are  pe- 
culiar to  partnership.61 


59  See      Haddock      v.      Astbury 
(1880),  32  N.  J.  Eq.  181,  Mechem's 
Gas.    936,    and    cases    in    following 
note.     Compare   Cox  v.  Willoughby 
(1879),  13  Ch.  Div.  863;  Neilson  v. 
Iron  Co.  (1886),  11  App.  Gas.  298. 

60  In  Lindley  on  Partnership  (7th 
ed.),   520,   521,  it   is   said:      "The 
court    has    enforced    the    following 
agreements    entered    into    upon    or 
with  a  view  to  a  dissolution,  name- 
ly:    Agreements    not    to    carry    on 
business   within   a   certain   distance 
or    for    a    certain    space    of    time 
(Whittaker  v.  Howe,  3  Beavan,  383; 
Turner  v.   Major,  3   Giffard,  442)  ; 
agreements  by  one  partner  to  with- 
draw  from    a   firm    and   assign   his 
share    to    his    copartners    (Gray    v. 
Smith,  43  Ch.  D.  208)  ;  agreements 
as    to    the    custody    of    partnership 
books  and  the  furnishing  of  copies 
thereof      (Lingen     v.     Simpson,     1 
Simons  &  Stuart,  600) ;  agreements 
that   a   third   party,    and   he    only, 
shall  get  in  debts   (Davis  v.  Amer, 
3    Drew.    64;    Turner   v.    Major,    3 
Giff.    442) ;     agreements    that    the 
value  of  the  share  of  an  outgoing 
or  a  deceased  partner  shall  be  as- 
certained   in    a    specified    way    and 
taken  accordingly  (Morris  v.  Kears- 
ley,  2  Y.  &  C.  Ex.   139;    Essex  v. 
Essex,  20  Beav.  442;  King  v.  Chuck, 
17  Beav.  325) ;  agreements  that  an 


outgoing  partner  shall  offer  his 
share  to  his  copartners  before  sell- 
ing it  to  other  persons  (Homfray 
v.  Fothergill,  1  Eq.  567) ;  agree- 
ments to  grant  an  annuity  to  a 
retiring  partner  and  his  widow 
(Aubin  v.  Holt,  2  K.  &  J.  66;  Page 
v.  Cox,  10  Hare,  163) ;  agreements 
not  to  divulge  or  make  use  of  a 
trade  secret  (Morison  v.  Moat,  9 
Hare,  241.)" 

61  Agreements  to  submit  to  arbi- 
tration are  not  usually  specifically 
enforced:  Caldwell  v.  Caldwell 
(1908),  157  Ala.  119,  47  So.  268; 
Kennedy  v..  Monarch  Mfg.  Co. 
(1904),  123  Iowa  344,  98  N.  W. 
796;  Wood  v.  Humphrey  (1873), 
114  Mass.  185;  Miles  v.  Schmidt 
(1897),  168  Mass.  339,  47  N.  E. 
115;  Woodruff  v.  Woodruff  (1888), 
44  N.  J.  Eq.  349,  16  Atl.  4,  1  L.  R. 
A.  380;  or  to  take  shares  at  a  valua- 
tion, where  the  parties  refuse  to  ap- 
point the  valuers  or  the  valuers  re- 
fuse to  act:  Vickers  v.  Vickers 
(1867),  L.  E.  4  Eq.  529;  Dinham 
v.  Bradford  (1869),  L.  B.  5  Ch. 
App.  519;  Milnes  v.  Gery  (1807), 
14  Ves.  400,  and  the  court  will  not 
attempt  to  fix  the  value  otherwise 
unless  valuation  by  the  particular 
person  appears  not  to  have  been 
of  the  essence  of  the  agreement: 
Dinham  v.  Bradford,  supra. 


199 


§  226]  LAW   OF  PARTNERSHIP 

2.  Of  Injunctions. 

§226.  In  what  cases  granted. — Injunctions  are  frequently 
granted  upon  the  application  of  one  partner  against  his  copart- 
ner, either  before  or  pending  or  after  a  dissolution. 

1.  Before  dissolution,  and  for  the  very  purpose  often  of  ob- 
viating the  necessity  for  a  dissolution,  injunctions  may  be  granted 
to  prevent  the  commission  by  partners  of  acts  inconsistent  with 
the  terms  of  their  agreement  or  violating  the  rights  of  their 
copartners.     Thus,  one  partner  may  be  enjoined  from  obstruct- 
ing or  impeding  the  business;  excluding  another  partner  from 
his  rightful  share  in  the  management  of  the  business;  interfer- 
ing with  the  servants  of  the  firm ;  removing  the  books  or  papers 
of  the  firm  or  excluding  his  copartner  from  access  to  them; 
using  partnership  property  for  individual  purposes;  engaging 
in  a  rival  business;  extending  the  partnership  transactions  be- 
yond the  limits  agreed  upon;  publishing  a  notice  of  dissolution 
before  the  stipulated  term  has  expired,  and  the  like.62 

2.  Pending  an  application  for  a  dissolution  or  for  an  account- 
ing,  injunction  may  be  issued  to  restrain  one  partner  from 
wrongfully  interfering  with,  secreting  or  disposing  of  the  prop- 
erty, creating  new  liabilities,  and  the  like.63 

3.  After  dissolution,  one  partner  may  be  enjoined  from  wast- 
ing, injuring,  disposing  of  or  wrongfully  dealing  with  the  assets ; 
from  holding  out  the  complainant  as  being  still  a  partner ;  from 
continuing  business  in  violation  of  his  agreement;  from  using 
the  old  firm  name  in  such  a  way  as  to  render  former  partners 
liable,  and  the  like.64 

62  See     Marble     Co.     v.     Eipley  Levine   v.    Michael    (1883),   35   La. 

(1870),     10    Wall.     (U.     S.)     339;  Ann.   1121. 

Leavitt  v.  Windsor  Land  &  Inv.  Co.  63  See  Wilson  v.  Fitchter  (1885), 

(1893),    4   C.   C.    A.    425,   54   Fed.  11  N.  J.  Eq.  71;    New  v.  Wright, 

439;  Pirtle  v.  Penn  (1835),  3  Dana  supra. 

(Ky.)    247,   28   Am.   Dec.   70,   Me-          64  See  McGowan  Co.  v.  McGowan 

chem's   Gas.    313,    Gilm.    Gas.    480;  (1872),  22  Ohio  St.  370;  Wilkinson 

New    v.    Wright    (1870),    44   Miss.  v.  Tilden  (1881),  9  Fed.  683;  Eob- 

202,   Meehem's   Gas.   319;    Katz   v.  erts  v.  McKee  (1859),  29  Ga.  161; 

Brewington   (1889),  71  Md.  79,  20  Shannon  v.  Wright   (1883),  60  Md. 

Atl.  139,  Meehem's  Gas.  929,  Gilm.  520,  Mechem's  Gas.  317,  Gilm.  Gas. 

Gas.  433;    Van   Keuren   v.   Trenton  481;    Fletcher  v.  Vandusen   (1879), 

Mfg.  Co.  (1861),  13  N.  J.  Eq.  302;  52  Iowa  448. 

200 


ACTIONS   BETWEEN  PARTNERS  [§  227 

3.  Of  Accounting  and  Dissolution. 

§227.  In  what  cases  granted — Accounting  without  a  disso- 
lution.— The  most  common  ground  for  appealing  to  a  court 
of  equity  is  to  secure  an  accounting  to  determine  the  interests 
of  partners  and  creditors,  to  adjust  mutual  claims  and  demands, 
and  to  obtain  a  decree  for  payment  and  distribution.  In  such  ' 
cases,  as  has  been  seen,  the  remedy  at  law  is  usually  inadequate. 
The  jurisdiction  of  a  court  of  equity  for  these  purposes  is  ample 
and  its  power  to  enforce  its  decrees  complete.65  Its  aid,  how- 
ever, must  be  sought  before  the  claim  has  become  stale,  and  the 
complainant's  laches  may  bar  relief.66 

A  demand  for  an  accounting  is  usually  coupled  with  a  demand 
for  dissolution,  and  because  it  not  only  encourages  dissension 
and  discontent  among  the  partners  to  order  frequent  account- 
ing, but  also  because  it  is  ordinarily  futile  to  order  an  accounting 
of  a  going  business  whose  daily  fluctuations  may  unsettle  the 
account  before  it  is  concluded,  it  was  formerly  the  rule  that 
an  accounting  would  not  be  granted  where  it  would  not  be  com- 
plete and  final  or  unless  it  was  coupled  with  a  dissolution.67 
The  modern  authorities  have  relaxed  this  rule  to  some  extent, 
and  there  are  cases  in  which  an  accounting  alone  may  be  granted. 
The  most  important  of  these,  according  to  Mr.  Justice  Lindley,68 
are  three:  1.  Where  one  partner  has  sought  to  withhold  from 
his  copartner  the  profit  arising  from  some  secret  transaction. 
2.  Where  the  partnership  is  for  a  term  of  years  still  unexpired, 
and  one  partner  has  sought  to  exclude  or  expel  his  copartner  or 
to  drive  him  to  a  dissolution.69  3.  Where  the  partnership  has 

65  See      Bracken      v.      Kennedy  Morrill  v.  Weeks  (1899),  70  N.  H. 
(1842),  4  111.  558,  Gilm.  Cas.  470;  178,    46    Atl.    32,   where   the    court 
Clark    v.    Gridley    (1871),    41    Cal.  said   that    delay   for   a   period  less 
119;    Denver  v.   Rbane    (1878),   99  than  that  fixed  by  a  statute  of  lim- 
TJ.  S.  355,  25  L.  ed.  476;  Bruns  v.  itations  would  not  bar  relief. 
Heise  (1905),  101  Md.  163,  60  Atl.  67  See  the  elaborate  discussion  in 
604.  Lord  v.  Hull  (1904),  178  N.  Y.  9, 

66  See  Bell  v.  Hudson  (1887),  73  70  N.  E.  69,  102  Am.  St.  E.  484, 
Cal.   285,   14  Pac.   791,  2   Am.   St.  Mechem's  Cas.  920,  Gilm.  Cas.  472. 
R.   791,  and  note    (here  the  action  68  Lindley    on    Partnership     (7th 
was  not  brought  until  25  years  after  ed.)  537. 

the     partner's     death).       Compare          69  See      Fairthorne      v.      Weston 

201 


§§  228,  229]  LAW  OF  PARTNERSHIP 

proved  a  failure,  and  the  partners  are  too  numerous  to  be  made 
parties  to  the  action,  and  a  limited  account  will  result  in  justice 
to  them  all.  To  these  may  be  added  (1)  under  some  circum- 
stances doubtless,  the  case  where  the  partnership  agreements 
provide  for  periodical  accountings,  and  (2)  the  case  of  account- 
ings as  to  distinct  transactions.70 

§228.  In  these  cases,  however,  an  accounting  will  not, 

except  in  pursuance  of  partnership  agreements,  be  granted  of 
an  isolated  portion  of  what  has  been  dealt  with  as  a-  complete 
and  general  whole.71  Moreover,  ' '  a  court  of  equity  will  not  take 
cognizance  of  an  action  for  an  accounting  as  a  mere  incident 
to  the  settlement  of  a  solitary  matter  in  dispute  between  part- 
ners, when  it  is  not  vital  to  either  party  or  to  the  business,  and 
a  dissolution  is  not  sought. ' '  72 

The  effect  of  the  illegality  of  the  transaction  in  an  action 
for  accounting  has  already  been  referred  to.73 

The  Uniform  Partnership  Act74  gives  the  right  to  a  "formal 
account"  to  any  partner  where  he  is  wrongfully  excluded  from 
the  partnership  business  or  property  by  his  copartners;  where 
the  right  exists  under  the  terms  of  any  agreement;  where  his 
copartner  may  be  charged  as  a  trustee  of  profits  or  property; 
and  "whenever  other  circumstances  render  it  just  and  rea- 
sonable. ' ' 

§229.  Nature  of  remedy  by  accounting- — What  in- 
cluded.— It  is  important  to  observe  that  this  equitable  action 
for  an  accounting,  is  not  merely  a  process  for  calling  ene  part- 
ner to  account  for  something  which  he  has  received  or  had,  or 

(1844),   3   Hare   387,   which  is  the  71  See  Davis  v.  Davis  (1882),  60 

case  upon  which  this  proposition  of  Miss.  615. 

Justice    Lindley    was    based.      See,  72  Lord  v.  Hull,  supra. 

also,    cases    of    accounting    at    the  73  See     ante,      §  46.      See,     also, 

suit  of  excluded  partners:   McCabe  Pfeuffer  v.  Maltby  (1881),  54  Tex. 

v.    Sinclair    (1904),    66    N.    J.    Eq.  454,  38  Am.  Rep.  631;   Pennington 

24,  58  Atl.  412;   Sanger  v.  French  v.  Todd   (1890),  47  N.  J.  Eq.  569, 

(1898),   157  N.   Y.   213,  51   N.   E.  21  Atl.  E.  297,  24  Am.  St.  K.  419. 

979;     Beilly    v.    Woblbert     (1916),  74  Sec.  22. 

196  Ala.  191,  72  So.  10. 

70 See  Patterson  v.  Ware   (1846), 
10  Ala.  444. 

202 


ACTIONS   BETWEEN   PARTNERS  [§  229 

to  render  an  account ;  it  is  an  action  for  adjustment,  for  contribu- 
tion to  losses,  for  settlement  of  affairs,  and  the  like,  and  may 
result  in  a  decree  against  a  partner  to  pay  something  even 
though  he  had  never  received  anything  on  account  of  the  part- 
nership.75 

Its  use  to  compel  an  accounting  by  a  partner  for  money  or 
property  received  by  him,  on  alleged  partnership  account,  is, 
however,  doubtless  the  most  common.  Familiar  instances  are 
demands  for  secret  profits,76  for  the  profits  of  competing  under- 
takings,77 to  compel  the  recognition  of  a  partnership  interest  in 
property  bought  or  acquired,78  to  compel  an  adjustment  for 
partnership  property,  money  or  credits  taken  or  disposed  of 
by  a  partner,79  and  the  like.  So,  a  partner  wrongly  excluded 
by  his  copartner  before  or  on  dissolution,  may  avail  himself 
of  this  remedy  to  secure  a  recognition  of  his  rights  and  com- 
pensation for  what  has  been  appropriated.80  It  is  also,  as  has 
been  seen,81  usually  the  remedy  available  against  a  partner  for 
breaches  of  duty  and  violations  of  partnership  agreements,  from 
which  the  partnership,  as  distinct  from  a  particular  partner,  is 
the  sufferer.82 

75  See    Spear   v.    Newell    (1841),          79  See  Folsom  v.  Marlette  (1897), 
13  Vt.  288,  Mechem's  Gas.  311.  23  Nev.  459,  49  Pac.  39,  Gilm.  Gas. 

76  See  Hodge  v.  Twitchell  (1885),      486. 

33  Minn.  389,  23  N-.  W.   547,  Me-  80  See   Pirtle  v.   Penn    (1835),   3 

chem's  Gas.  862;    Mitchell  v.  Eeed  Dana   (Ky.)    247,  28  Am.  Dec.  70, 

(1874),  61  N.  Y.  123,  19  Am.  Eep.  Meehem's  Gas.  313,  Gilm.  Gas.  480; 

252,  Mechem's   Gas.   864;    Tebbetts  Moore  v.  Eawson  (1904),  185  Mass, 

v.    Dearborn    (1883),    74    Me.    392,  264,    70   N.    E.   64,    Mechem's   Gas. 

Mechem's  Gas.  871;    Jones  v.  Dex-  1089,  199  Mass.  493,  85  N.  E.  586; 

ter   (1881),  130  Mass.  380,  30  Am.  Karrick  v.   Hannaman    (1897),   168 

Rep.     459,     Mechem's     Gas.     873;  U.  S.  328,  42  L.  ed.  484,  18  Sup.  Ct. 

Bloom  v.  Lofgren  (1896),  64  Minn.  135;  Pearce  v.  Ham  (1885),  113  TJ. 

1,  65  N.  W.  960,  Burd.  Gas.  501.  S.  585,  28  L.  ed.  1067,  5  Sup.  Ct. 

77 See  Latta  v.  Kilbourn   (1893),  676. 

150  U.  S.  524,  37  L.  ed.  1169,  Me-  81  See  ante,  §  214. 

chem's  Gas.  260,  Burd.  Gas.  503.  82 See  Miller  v.  Freeman  (1900), 

78  See      Metcalfe      v.      Bradshaw  111  Ga.  654,  36  S.  E.  961,  51  L.  E. 

(1893),  145  111.  124,  33  N.  E.  1116,  A.  504,  Mechem's  Gas.  894;  Childers 

36  Am.  St.  E.  478,  Mechem's  Gas.  v.  Neely   (1899),  47  W.  Va.  70,  34 

875.  S.  E.  828,  49  L.  E.  A.  468. 

203 


§§  230,  231]  LAW  OP  PARTNERSHIP 

§230.  Who  may  demand  accounting.— The  application  for 
the  accounting  may  be  made  by  a  partner  or  one  who  stands 
in  the  right  of  a  partner  (actions  between  partners  being  the 
only  subject  involved  in  this  chapter) ;  by  the  personal  rep- 
resentative of  a  deceased  partner;  by  the  assignee  or  purchaser 
of  the  interest  of  a  partner;  iby  the  purchaser  of  a  partner's 
share  upon  a  sale  on  execution ;  but  not  usually  by  a  general 
creditor.83 

4.  Of  Receivers. 

§231.  When  will  be  appointed. — Receivers  are  frequently 
appointed  in  the  settlement  of  partnership  affairs,  though  the 
appointment  is  not  a  matter  of  course  and  will  not  be  made 
unless  good  grounds  exist  for  it.  Since  a  receivership  usually 
ousts  the  partners  of  their  possession,  involves  additional  ex- 
pense, and  commits  the  management  to  a  stranger,  courts  feel 
a  reluctance  to  appoint  one.  A  receiver  will  not  usually  be 
appointed  except  upon  dissolution;  but  the  appointment  may 
be  made  before,  if  a  dissolution  is  inevitable,  or  if  the  partner- 
ship is  insolvent  and  the  assets  are  being  wasted  or  improperly 
applied;  but  mere  dispute  or  ill-feeling  among  the  partners  is 
not  a  sufficient  ground.84  It  may  be  made  also  where  one  part- 
ner is  insolvent  and  is  wasting  the  assets  or  breaking  up  the 
business.85  So,  "wilful  acts  of  fraud  by  the  defendant,  such 
as  misappropriation  of  firm  funds,  making  false  and  improper 
entries  upon  the  firm  books,  depriving  complainant  of  access 
to  the  books,  and  concealing  from  him  the  true  condition  of  the 
business,  afford  sufficient  ground  for  appointing  a  receiver."86 

83  See  Bentley  v.  Harris   (1873),      Am.  Dec.  198;   Heflebower  v.  Buck 
10  K.  I.  434,  14  Am.  Eep.  695;  Free-       (1885),  64  Md.  15. 

man  v.  Freeman  (1884),  136  Mass.  85 See  Shannon  v.  Wright  (1883), 

260;    Gerard  v.   Bates    (1888),   124  60    Md.    520,    Mechem's    Gas.    317, 

111.  150,  7  Am.  St.  Kep.  350,  16  N.  Gilm.   Gas.   481;    Phillips  v.    Treze- 

E.  258;  Channon  v.  Stewart  (1882),  vant  (1872),  67  N.  Car.  370;  Sutro 

103  111.  541.  v.  Wagner  (1873),  23  N.  J.  Eq.  388, 

Under    the    Uniform    Partnership  Gilm.    Gas.    483;    Barnes    v.    Jones 

Act,  see  §§  22  and  27.  (1883),  91  Ind.  161. 

84  See  New  v.  Wright   (1870),  44  86  High    on    Keceivers    (3d    ed.), 
Miss.  202,  Mechem's  Gas.  319;  Allen  §  483. 

v.   Hawley    (1855),   6   Fla.   142,   63 

204 


ACTIONS   BETWEEN   PARTNERS  [§  232 

A  receiver  may  be  appointed  to  supersede  a  surviving  partner 
or  a  sole  managing  partner  if  he  is  acting  wrongfully  or  misusing 
or  misapplying  the  assets.87  One  of  the  partners  may  be  ap- 
pointed receiver  if  he  is  otherwise  a  suitable  person. 

The  occasion  for  the  appointment  of  a  receiver  usually  arises 
in  actions  between  the  partners  themselves  or  their  representa- 
tives. The  mere  general  creditors  of  the  partnership  or  of  a 
partner  have  rarely  any  standing  to  apply  for  a  receivership 
over  the  partnership  property,  unless  a  statute  provides  for  it. 

§232.  Powers  and  duties  of  receiver. — The  receiver  is  an 
officer  of  the  court  and  acts  under  its  direction.  He  may  be 
authorized  to  continue  the  business  long  enough  to  permit  its 
being  wound  up  without  sacrifice.  He  has  not,  ordinarily,  in 
the  absence  of  a  statute  or  an  assignment,  the  title  to  the  prop- 
erty,88 but  he  has  the  right  of  possession  and  disposition,  and 
should  be  given  control  of  all  of  the  assets  of  the  firm.  By  the 
weight  of  authority,  probably,  the  receiver  has  no  inherent  au- 
thority to  sue  in  his  own  name  to  collect  the  debts  or  recover 
the  property  of  the  firm  89  and  he  cannot  usually  be  sued  upon 
the  firm  debts  without  the  consent  of  the  court,  nor  can  creditors 
of  the  firm  levy  upon  the  property  in  his  possession.90 

"The  appointment  of  the  receiver  does  not  absolve  the  co- 

87 See  Word  v.  Word   (1889),  90  45    Atl.    752,    76    Am.    St.    B.    779. 

Ala.  81,  7  So.  412.  Some  courts,  however,  regard  him  as 

88  The  ordinary  receiver  of  part-  in  effect  an  assignee.     See  Wilkin- 

nership      property,      appointed      by  son  v.  Eutherford  (1887),  49  N.  J. 

courts   of  equity,  has   ordinarily  no  L.  241,  8  Atl.  507. 

title  to   the   property,   unless   there  89  Garver  v.  Kent  (1880),  70  Ind. 

has  been  an  assignment  of  it  made  428;   Wilson  v.  Welch    (1892),  157 

to  him  or  unless  there  is  some  valid  Mass.   77,  31   N.   E.  712;    Battle  v. 

statute  so  providing.     (The  case  of  Davis     (1872),     66     N.     Car.     252; 

insolvent     corporations     is     usually  Yeager  v.   Wallace    (1863),  44  Pa. 

different.)       See    Heffron    v.    Gage  294.       But    compare    Wilkinson    v. 

(1894),  149  111.  182,  36  N.  E.  569;  Eutherford  supra;  Baker  v.  Cooper 

Harrison  v.  Warren  Co.  (1903),  183  (1869),    57    Me.    388;    Henning    v. 

Mass.  123,  66  N.  E.  589;   Stokes  v.  Eaymond   (1886),  35  Minn.  303,  29 

Hoffman  House   (J901),  167  N.  Y.  N.  W.  132. 

554,  60  N.  E.  667,  53  L.  E.  A.  870;  90  See   Jackson   v.   Lahee    (1886), 

Singerly  v.  Fox  (1874),  75  Pa.  112;  114  111.  287,  2  N.  E.  172. 
Murtey  v.  Allen  (1899),  71  Vt.  377, 

205 


§  233]  LAW   OF   PARTNERSHIP 

partners  from  their  partnership  debts,  nor  stay  or  prevent 
actions  against  the  members  of  the  copartnership  for  the  recov- 
ery of  such  debts.  Judgments  so  obtained  cannot,  however,  be 
enforced  by  execution  levied  on  the  assets  in  the  hands  of  the 
receiver,  for  they  are  in  custodia,  legis,  but  may  share  in  the 
assets  upon  a  proper  application  to  the  court. ' ' 91 

5.  Action  "by  One  Partnership  Against  Another  Having  Com- 
mon Partners. 

§  233.  Jurisdiction  of  equity. — As  has  been  seen  in  an  earlier 
section,92  it  is  commonly  held  that  no  action  at  law  can  be  main- 
tained by  one  partnership  against  another  where  the  two  have 
one  or  more  partners  in  common.  The  forum  for  such  eases  is 
said  to  be  in  equity.  This  is  because  of  the  difficulty  as  to  the 
common  partner  being  both  plaintiff  and  defendant  at  law — a 
difficulty  which  equity  is  able  to  avoid.  As  has  also  been  seen,93 
it  has  been  held  in  some  of  the  States  having  the  so-called  ' '  code ' ' 
procedure  that  this  result  can  be  reached  in  such  States  under 
the  "civil  action."  It  has  been  denied  that  even  equity  would 
entertain  the  action,  unless  there  was  to  be  an  accounting  be- 
tween the  partners  in  the  respective  partnerships  as  well  as  the 
adjudication  of  the  claim  of  the  one  partnership  against  the 
other.94  This  would  not  be  necessary  if  the  two  firms  had  al- 
ready settled  an  account  between  themselves.96  Some  courts 
have  held  that  the  action  in  equity  can  be  maintained  without 
an  accounting  between  the  partners,  at  least  unless  some  show- 
ing is  made  that  it  would  be  inequitable  to  do  so.96  Judge 

91Bogert  v.   Turner   (1909),   135  116  Mieh.  32,  74  N.  W.  296;    Be 

N.  Y.  App.  Div.  530,  120  N.  Y.  S.  Buckhouse     (1874),     2     Low.     331, 

420.  Ames'  Gas.  446.     See,  also,  Haven 

92  Ante,  §219.  v.   Wakefield    (1866),   39   111.    509; 

93  Ante,  §220.  Crosby  v.  Timolat  (1892),  50  Minn. 

94  See    5    American    Law    Review  171,  52  N.  W.  526,  Gilm.  Cas.  469 ; 
47;    Dixon,   Partn.   268;    Rogers   v.  Noyes  v.  Ostrom  (1910),  113  Minn. 
Rogers  (1847),  40  N.  Car.  31.  Ill,  129  N.  W.  142;  Gibson  v.  Ohio 

95  See  Calvit  v.  Markham  (1839),  Farina  Co.  (1859),  2  Disney  (Ohio) 
4  Miss.  (3  How.)  343.  499,  13  Ohio  Dec.  306. 

96  See  Burrows  v.  Leech   (1898), 

206 


ACTIONS   BETWEEN  PARTNERS  [§  233 

Story  said,  many  years  ago,97  that  ' '  Courts  of  equity  in  all  such 
cases  look  behind  the  form  of  the  transactions  to  their  substance, 
and  treat  the  different  firms  for  the  purposes  of  substantial  jus- 
tice exactly  as  if  they  were  composed  of  strangers,  or  were  in 
fact  corporate  companies." 

97 Story's    Eq.    Jur.    (13th    ed.), 
§680;  (14th  ed.),  §  9£3, 


207 


CHAPTER  X. 


OP   THE  AUTHORITY  OF   PARTNERS. 


§  234.  In  general. 

I.  AUTHORITY  AS  BETWEEN  THE 
PARTNERS  THEMSELVES. 

235.  As  between  themselves,  part- 

ners may  fix  authority  by 
agreement. 

236.  If  no  authority  agreed  upon, 

usual  authority  implied. 

II.  AUTHORITY  AS  BETWEEN  THE 
FIRM  AND  THIRD  PERSONS. 

237.  Of  what  matters  third  persons 

must  take  notice. 

238.  Continued    existence    of 

partnership  relation. 

239.  Evidence  of  an  adverse 

interest. 

240.  Nature    and    extent    of   busi- 

ness to  be  observed. 

241.  Distinction      between 

trading     and     non-trading 
firms. 

242,243.  The  power  of  a 

partner  to  impose  restric- 
tions by  dissent. 

244,245.  Of  the  partner  as  agent 
of  the  partnership. 

246.  Partner  has   no    implied   au- 

thority outside  of  scope  of 
business. 

247.  What  meant  by  scope. 

248.  Extending   original   scope  by 

subsequent  conduct. 

249.  Consideration     of     particular 

authorities. 


§250. 


Admissions,     representa- 


tions and  declarations. 

251.  Agents  —  Appointment 

of.    ' 

252.  Arbitration. 

253.  Assignments     for     cred- 
itors. 

254.  Attorneys — Employment 

of. 

255-257.  Bills  and  notes. 

258.  Borrowing  money. 

259.  Buying. 

260.  Collecting  and  receiving 

payment. 

261.  Compromising   debts. 

262.  Confessing  judgment. 

263, 264.  Deeds,     bonds     and 

other      instruments     under 
seal. 

265.  Hiring  or  leasing  prop- 
erty. 

266.  Insurance. 

267-269.  Mortgages     and 

pledges. 

270,271.  Notice. 

272,  273.  Paying  debts. 

274,  275.  Sales. 

276.  Suits  at  law. 

277.  Suretyship  and  guaranty. 

278,279.  Of    the    authority    of    a 

managing  partner. 

280.  Several  managers — Di- 
rectors. 

281,'282.  Of  the  powers  of  a'  ma- 
jority. 

283.  Ratification  of  unauthorized 
acts. 


208 


AUTHORITY    OP    PARTNERS  [§§234,235 

§  234.  In  general. — The  creation  of  partnership,  as  has  been 
seen,  creates  a  relation  of  agency  between  the  partners,  each 
partner  being  at  once  principal  of  and  agent  for  the  others. 
Those  who  adopt  the  separate  entity  theory  of  the  partnership 
regard  each  partner  as  agent  for  the  firm,  as  such  an  entity, 
rather  than  as  principal  for  himself  and  a-gent  for  the  others. 
Many  of  those  who  do  not  regard  the  partnership  as  a  distinct 
entity  constantly  think  of  all  of  the  partners  collectively  as  be- 
ing the  principals  of  each  partner  as  an  agent.  The  results, 
however,  are  not  materially  different,  and  it  is  sufficient  for  the 
present  purpose  to  say  that  the  authority  of  each  partner  to 
bind  his  partners  as  well  as  himself — or  to  bind  the  firm — rests 
substantially  upon  the  general  principles  of  agency. 

It  will  be  evident  that  the  authority  of  the  partner-agent  to 
bind  his  principal,  i.  e.,  his  partners  or  the  firm,  presents  the 
same  two  aspects  that  have  been  discovered  in  the  law  of  agency, 
namely : 

(1)  The  authority  as  between  the  partners  themselves,  and 

(2)  The  authority  as  between  the  firm  and  third  persons. 

I.  AUTHORITY  AS  BETWEEN  THE  PA'RTNERS  THEMSELVES. 

§  235.  As  between  themselves,  partners  may  fix  authority  by 
agreement. — It  has  been  seen  that,  between  the  agent  and  the 
principal,  the  authority  of  the  agent  may  be  fixed  by  their  agree- 
ment, and  that,  as  between  these  parties,  the  agreement  so  made 
is  usually  conclusive,  even  though,  as  between  the  principal  and 
third  persons,  the  principal  may  be  held  liable  for  the  agent's 
exercise  of  a  more  extended  authority.  The  same  rule  applies 
here.  The  partners  may  by  their  own  agreement  determine  the 
authority  which  shall  be  exercised  by  each  partner,  and  be- 
tween themselves  this  agreement,  unless  expanded  or  waived, 
will  be  conclusive.  It  will  also  ordinarily  be  conclusive  as  re- 
spects third  persons  who  have  notice  of  the  agreement ; 1  but 

1  Third  persons  bound  by  limita-  Knox  v.  Buffington  (1879),  50  Iowa 
tions  upon  a  partner's  authority  im-  320;  Sladen  v.  Lance  (1909),  151  N. 
posed  by  the  partnership  agreement,  Car.  492,  66  S.  E.  449.  Information 
when  brought  to  their  notice:  Ead-  sufficient  to  put  a  reasonably  pru- 
cliffe  v.  Varner  (1875),  55  Ga.  427;  dent  and  cautious  man  upon  an  in- 
Mech.  Part.— 14  209 


§  236]  LAW  OF  PARTNERSHIP 

secret  limitations  upon  the  usual  powers  of  a  partner  can  be  no 
more  conclusive  upon  third  persons  who  have  no  notice  of  them 
than  are  secret  limitations  upon  the  usual  authority  of  an  agent.2 
The  result  may  be,  therefore,  as  in  the  case  of  agency,  that  a 
partner  may,  by  exceeding  secret  limitations  but  acting  within 
the  usual  authority,  bind  the  firm  to  third  persons,  and,  at  the 
same  time,  make  himself  liable  to  his  partners  for  the  loss  they 
may  sustain  by  reason  of  his  act.3 

§  236.  If  no  authority  agreed  upon,  usual  authority  implied. 

— If,  however,  the  partners  have  not  expressly  agreed  upon  the 
authority  that  shall  be  exercised  by  each,  then  they  must  be 
taken  as  having  impliedly  agreed  that  the  usual  and  ordinary 
powers  of  partners  in  similar  cases  may  be  exercised.  In  this 
event,  the  question  as  between  the  partners  will  be  substantially 
the  same  as  between  the  firm  and  third  persons,  and  the  ques- 
tion then  arises,  What  are  the  usual  or  the  implied  powers  of 
a  partner?  As  this  question  is,  therefore,  in  the  ordinary  case 
to  be  answered  in  substantially  the  same  way  between  whatever 
parties  it  may  arise,  we  will  consider  it,  for  both  purposes,  under 
the  head  of  the  implied  authority  of  partners  as  respects  third 
persons. 

It  is,  of  course,  true  that  as  between  the  partners  themselves 
estoppels  may  operate  as  well  as  in  the  case  of  third  persons,  but 
that  question  need  not  now  be  considered. 

quiry    which   would    have    disclosed  ship  to  persons  having  knowledge  of 

the  facts,  is  held  enough :    Baxter  v.  the  restriction. ' ' 

Rollins  (1894),  90  Iowa  217,  57  N.  8  See  Rice  v.  Jackson  (1895),  171 

W.  838,  48  Am.  St.  R.  432;  Bromley  Pa.  89,  32  Atl.  1036;  Moore  v.  May 

v.  Elliot   (1859),  38  N.  H.  287,  75  (1903),  117  Wis.  192,  94  N.  W.  45; 

Am.    Dec.   182.      This   is  usually  a  Winship  v.  Bank  of  U.  S.  (1831),  5 

question  of  fact  under  all  the  cir-  Pet.  (UVS.)  552,  8  L.  ed.  216,  Gilm. 

cumstances:       International     Trust  Gas.  356. 

Co.  v.  Wilson  (1894),  101  Mass.  80,  3  See  Leavitt  v.  Peck   (1819),   3 

36  N.  E.  589,  Burd.  Cas.  361.     So,  Conn.    125,   8    Am.    Dec.    157,   Me- 

also,  the  Uniform  Partnership  Act,  chem's    Cas.    375;    Stone   v.   Wend- 

Sec.  9:     "  (4)  No  act  of  a  partner  over  (1876),  2  Mo.  App.  247;  Vance 

in  contravention  of  a  restriction  on  v.  Blair  (1849),  18  Ohio  532,  51  Am. 

his  authority  shall  bind  the  partner-  Dec.  467. 

210 


AUTHORITY   OF    PARTNERS  [§§  237-239 

II.  AUTHORITY  AS  BETWEEN  THE  FIRM  AND  THIRD  PERSONS. 

§  237.  Of  what  matters  third  persons  must  take  notice. — It 

was  found  in  the  law  of  Agency  that  third  persons  would  not 
be  justified  in  proceeding  blindly  upon  the  assumption  that  an 
agent  really  possessed  every  authority  which  he  might  under- 
take to  exercise;  but  that  they  must  investigate  his  authority 
and  act  in  good  faith  and  with  reasonable  prudence.  The  same 
principle  applies  here.  Persons  dealing  with  a  partner  as  such 
are  bound  to  determine  the  existence  of  the  partnership  and  to 
take  heed  of  all  limitations  of  which  the  nature  and  extent  of 
the  business  may  giv.e  notice,  as  well  as  of  those  restrictions 
which  are  actually  brought  to  their  notice  or  knowledge. 

§238. Continued  existence  of  partnership  relation. — 

Many  important  questions  may  arise  here  as  to  the  continued 
existence  of  the  partnership  relation,  either  generally  or  in  re- 
spect of  this  alleged  partner  only.4  Has  the  partnership  been 
dissolved  by  events  which  so  operate,  and  without  the  necessity 
of  formal  notice?  Has  it  been  otherwise  dissolved,  and  has 
proper  notice  been  given?  Has  this  particular  partner  alone 
retired,  or  been  expelled,  or  has  his  interest  been  seized  or  as- 
signed? If  the  partnership  has  been  dissolved,  is  what  the 
partner  in  question  proposes  to  do  an  act  that  he  may  properly 
do  in  closing  up  the  business,  or  is  he  attempting  to  continue 
it?  These  and  similar  questions  are  more  fully  considered  in 
later  chapters  on  Dissolution  and  Notice.5 

§239. Evidence  of  an  adverse  interest. — All  persons 

dealing  with  a  partner  are,  moreover,  charged  with  notice  of 
the  principle  applicable  to  all  cases  of  delegated  authority,  name- 

4  As  will  be  seen,  actual  dissolu-  have   a  veiy  different   effect,   upon 

tion     of     the     partnership     usually  his  present  authority,  from  a  mere 

works   an   important   change  in   the  mortgage   of  it   which   has   not  yet 

authority   of  a   partner.     A   single  been    foreclosed.      See    Monroe    v. 

partner's  relation  may  be  complete-  Hamilton  (1877),  60  Ala.  226,  Burd. 

ly    changed    or    it    may   be    in    the  Cas.  306. 

process  of  change.    A  completed  sale  5  See  post,  Chapters  XV,  XVI. 
of    his   interest,    for   example,   may 

211 


§  240]  -    LAW   OF   PARTNERSHIP 

ly,  that  the  authority  presumptively  is  to  be  exercised  for  the 
benefit  of  the  principal  and  not  of  the  agent  himself;  and  per- 
sons who  deal  with  a  partner  with  notice  that  he  is  abusing  his 
authority  or  is  using  the  property,  credit  or  responsibility  of 
the  partnership  for  his  own  private  purposes,  as,  for  example, 
to  pay  his  own  individual  debts,  can  not  hold  against  the  other 
partners  unless  they  can  show  the  consent  of  the  other  partners 
to  such  dealing,  or  can  estop  such  other  partners  from  assert- 
ing their  rights.6  The  same  result  would  follow  where,  though 
the  partner  acting  was  not  personally  to  gain  by  the  transaction, 
his  act  would  be  an  obvious  fraud  upon  his  copartner,  as  where, 
for  example,  he  proposes  to  give  away  the  partnership  property 
or  use  its  credit  where  it  had  no  interest  and  could  receive  no 
benefit. 

§240.  Nature  and  extent  of  business  to  be  observed. — The 

nature  and  scope  of  the  business  are  constantly  to  be  regarded. 
It  may  be  limited  to  a  single  venture  or  transaction,  and  in  such 
a  case  limitations  similar  to  those  imposed  by  a  special  agency 
must  be  observed.  It  may  be  confined  to  a  single  line  of  busi- 

6  This  requirement  demands  more  lumbia  Nat.  Bank  v.  Bice   (1896), 

than  mere  good  faith  or  payment  of  48  Neb.  428,  67  N.  W.  165,  Burd. 

consideration,    on    the   part    of   the  Gas.    309.      See    more    fully    post, 

transferee.    One  who  buys  property,  §§  274,  275. 

not  negotiable,  from  another  can  And  even  where  the  partner  trans- 
ordinarily  acquire  no  better  title  fers  a  negotiable  thing,  like  the 
than  his  transferor  was  actually  firm 's  own  note  or  a  note  held  by  it, 
authorized  to  transfer,  notwith-  the  first  transferee  often  cannot  fail 
standing  possession,  good  faith,  or  to  see  that  the  partner  is  apparently 
the  payment  of  value,  unless  he  can  abusing  his  authority,  e.  g.,  where  he 
raise  an  estoppel, — unless  he  can  is  using  obviously  partnership  cred- 
show  that  he  was  fairly  led  to  part  its  to  pay  his  individual  debts,  and 
with  his  money  in  reliance  upon  such  transferee  cannot  hold  or  re- 
some  conduct  of  the  true  owner  cover,  though  he  may  have  the 
which  was  reasonably  calculated  to  power,  in  many  cases,  under  the  law 
make  him  believe  that  the  transfer  of  negotiable  instruments,  to  trans- 
was  authorized.  Compare  Brickett  fer  to  a  bona  fide  purchaser  who  can 
v.  Downs  (1895),  163  Mass.  70,  39  hold  or  recover.  See  Nichols  v. 
N.  E.  776,  Burd.  Gas.  215,  with  Thomas  (1915),  51  Okla.  212,  151 
Locke  v.  Lewis  (1878),  124  Mass.  Pac.  847,  L.  E.  A.  1916  B  908. 
1,  26  Am.  Rep.  631.  See,  also,  Co- 

212 


AUTHORITY   OP    PARTNERS  [§  241 

ness,  and  in  such  a  case  the  implied  authority  must  be  limited 
by  the  usages  of  that  business,  unless  the  partners  have,  by  their 
words  or  conduct,  given  it  a  wider  scope.  It  may  be  a  business 
of  a  particular  kind,  as  in  the  case  of  a  professional  partnership, 
in  respect  of  which  the  law  recognizes  but  limited  powers.  Of 
all  such  facts  third  persons  must  take  notice,  and  must  be  bound 
by  the  legal  conclusions  to  be  drawn  from  them.7 

Provisions  in  the  partnership  articles,  however,  which  would 
limit  the  usual  and  ordinary  authority  of  a  partner  in  such  a 
partnership  or  in  this  one  as  actually  and  openly  carried  on, 
would  not  ordinarily  affect  a  third  person  who  was  ignorant  of 
them.8 

§  241.  Same  subject — Distinction  between  trading  and  non- 
trading  firms. — Perhaps  the  most  important  distinction  to  be 
observed  as  to  the  nature  of  the  partnership  business  is  that 
drawn  between  trading  and  non-trading  partnerships,  or,  as  it 
is  sometimes  put,  between  commercial  and  non-commercial  part- 
nerships. "The  test  of  the  character  of  the  partnership,"  it  is 
said  in  one  case,  "is  buying  and  selling.  If  it  buys  and  sells, 
it  is  commercial  or  trading.  If  it  does  not  buy  or  sell,  it  is  one 
of  employment  or  occupation."9  By  this  is  meant,  of  course, 

7  Where  a  partnership  is  limited  of  common  prudence  to  make  inquiry 

to   a  particular   trade   or  business,  about    them.      Bromley    v.     Elliot 

one    partner    cannot    bind    his    co-  (1859),  38  N.  H.  287,  75  Am.  Dec. 

partner  by  any  contract  not  relat-  182.      To    same    effect:    Baxter   v. 

ing  to  such  trade  or  business,  and  Eollins  (1894),  90  Iowa  217,  57  N. 

third  persons  will   be   presumed   to  W.  838.     See,  also,  Wilson  v.  Eich- 

have  knowledge  of  the  limited  na-  ards  (1881),  28  Minn.  337,  9  N.  W. 

ture    of   the   partnership   from   cir-  872;    Cargill   v.    Corby    (1852),    15 

cumstances  connected  with  the  busi-  Mo.    425;    Peterson    v.    Armstrong 

ness    of    the    firm.      Livingston    v.  (1901),  24  Utah  96,   66  Pae.   767; 

Boosevelt  (1809),  4  Johns.  (N.  Y.)  Iroquois     Eubber     Co.     v.     Griffin 

251,  4  Am.  Dec.  273,  1  Am.  Lead.  (1919),  226  N.  Y.  297,  123  N.  E. 

Cas.,  p.  507  and  note.    Persons  deal-  369. 

ing  with  partners  are  bound  by  the          8  See  Winship   v.  Bank  of  U.   S. 

agreement     between     the     partners  (1831),  5  Pet.  (U.  S.)  529,  8  L.  ed. 

themselves  if  such   persons,  at   the  216,  Gilm.  Cas.  356. 
time  of  the  dealing,  knew  the  nature          9  See  Lee  v.  First  National  Bank 

of   such   agreement,   or  had   knowl-  (1890),  45  Kan.  8,  25  Pac.  196,  11 

edge  of  such  facts  and  circumstances  L.  E.  A.  238 ;   Winship  v.  Bank  of 

relating  thereto  as  would  lead  a  man  United  States  (1831),  5  Peters  (U. 

213 


241] 


LAW  OF  PARTNERSHIP 


buying  and  selling  as  a  business,  and  not  as  a  mere  incident  to 
some  other  business  or  occupation.10  While  it  must  be  confessed 
that  this  test  does  not  always  seem  to  be  a  very  happy  one,  or 
one  easy  of  application,  the  distinction  itself  is  usually  an  im- 
portant one.  As  can  readily  be  seen,  and  as  will  be  more  fully 
observed  hereafter,  much  greater  powers,  of  a  commercial  char- 
acter at  least,  may  properly  be  regarded  as  incident  to  a  com- 
mercial or  trading  business  than  to  one  for  the  exercise  of  a 
profession  or  occupation  merely.  Of  this  distinction  and  its 
legal  consequences  third  persons  are  bound  to  take  notice. 

In  dealing  with  this  question  in  another  case,11  the  court, 


S.)  529,  Gilm.  Gas.  356;  Bowling  v. 
Exchange  Bank  (1892),  145  U.  S. 
512,  12  Sup.  Ct.  928,  36  L.  ed.  795, 
Mechem's  Cas.  356;  Pease  v.  Cole 
(1885),  53  Conn.  32,  22  Atl.  681,  55 
Am.  Rep.  53,  Meehem's  Cas.  344, 
Burd.  Cas.  314,  Gilm.  Cas.  372; 
Smith  v.  Sloan  (1875),  37  Wis.  285, 
19  Am.  Rep.  757;  Phillips  v.  Stan- 
zell  (1895),  28  S.  W.  (Tex.)  900, 
Mechem's  Cas.  944,  Burd.  Cas.  323; 
Randall  v.  Merideth  (1890),  76  Tex. 
669,  13  S.  W.  576;  Marsh  v.  Wheeler 
(1904),  77  Conn.  449,  59  Atl.  410, 
107  Am.  St.  R.  40;  Vetsch  v.  Neiss 
(1896),  66  Minn.  459,  69  N.  W.  315, 
Burd.  Cas.  328,  Gilm.  Cas.  379;  Hig- 
gins  v.  Beauchamp  [1914],  3  K.  B. 
1192;  Schumacher  v.  Sumner  Tele- 
phone Co.  (1913),  161  Iowa  326,  142 
N.  W.  1034,  Ann.  Cas.  1916  A  201; 
First  Nat.  Bank  v.  Farson  (1919), 
226  N.  Y.  218,  123  N.  E.  490. 

The  so-called  mining-partnership, 
recognized  in  several  states,  is  a 
non-trading  partnership:  Childers  v. 
Neely  (1899),  47  W.  Va.  70,  34  S. 
E.  828,  49  L.  R.  A.  468,  81  Am.  St. 
R.  777,  Mechem's  Cas.  34;  Congdon 
v.  Olds  (1896),  18  Mont.  487,  46 
Pac.  261,  Burd.  Cas.  331.  For  other 
illustrations  see  post,  §§  255-257. 


10  Thus    in   Randall   v.   Merideth, 
supra,    the    court    quotes    with    ap- 
proval the  definition  of  Bates,  Partn. 
§  327,  which  emphasises  this  point: 
"If    the    partnership    contemplates 
the  periodical  or  continuous  or  fre- 
quent purchasing,  not  as  incidental 
to  an  occupation,  but  for  the  pur- 
pose of  selling  again  the  thing  pur- 
chased,   either    in    its    original    or 
manufactured  state,  it  is  a  trading 
partnership;    otherwise   it  is   not." 
Marsh  v.  Wheeler,  supra,  to  some  ex- 
tent seems  contrary  to  this.     It  is 
there   said   that   those   partnerships 
are  trading  "whose  conduct  so  in- 
volves buying  and  selling,   whether 
incidentally    or    otherwise,    that    it 
naturally  comprehends  the   employ- 
ment   of    capital,    credit,    and    the 
usual  instrumentalities  of  trade,  and 
frequent  contact   with  the  commer- 
cial world  in  dealings  which  in  their 
character    and    incidents    are    like 
those  of  traders  generally. ' '     Part- 
nerships    for    a    single     enterprise, 
often     called      "joint      ventures," 
(ante,  §§16,  43),  would  usually  be 
non-trading. 

11  Woodruff  v.  Scaife   (1887),. 83 
Ala.  152,  3  So.  311. 


214 


AUTHORITY    OF    PARTNERS  [§  242 

speaking  of  a  farming  partnership,  said:  "The  partnership  in 
this  case  is  not  a  trading  or  commercial  one,  which  is  generally 
governed  as  to  its  scope  of  authority  by  the  rules  of  the  law- 
merchant,  of  which  the  courts  take  judicial  cognizance.  The 
principle  governing  a  non-trading  partnership  is  well  settled. 
There  are  three  classes  of  cases  where  each  partner  connected 
with  such  associations  may  lawfully  bind  the  firm;  the  burden, 
in  each  case,  being  on  the  plaintiff  to  prove  the  facts  by  which 
such  authority  is  established,  or  from  which  it  may  be  implied: 
(1)  Where  he  has  express  authority  to  do  so;  (2)  where  the 
contract  made,  or  thing  done,  is  necessary  in  order  to  carry  on 
the  business  of  the  partnership;  and  (3)  where  it  is  usually  or 
customarily  incident  to  other  partnerships  of  like  nature." 
The  Uniform  Partnership  Act  is  silent  as  to  this  distinction. 

§  242.  Same  subject — The  power  of  a  partner  to  impose  re- 
strictions by  dissent. — The  limitations  upon  the  implied  au- 
thority of  one  partner  may  also  be  increased  in  certain  cases  by 
his  copartner's  refusal  to  be  bound  by  his  contemplated  acts. 
One  partner  cannot  by  secret  dissent  impose  limitations  upon 
his  partner 's  authority  to .  bind  the  firm  to  third  persons ; 12 
neither  can  one  partner  by  an  open  and  communicated  dissent, 
without  a  dissolution,  deprive  his  partner  of  those  powers  which 
the  partnership  articles  confer  upon  him,13  or  of  those  whose 
exercise  is  essential  to  the  continuance  -of  the  business,14  or,  with 
or  without  a  dissolution,  of  those  essential  to  the  protection  of 
the  partner  against  the  debts,15  nor  can  he  by  such  dissent  im- 

12  This   is,   of   course,    in    accord-  named  by  the  other  partner.     The 
ance  with  the  rule  requiring  notice  latter  gave  personal  and  public  no- 
of  revocation  of  authority,  and  the  tices    forbidding    ' '  all    and    every- 
like.  one"    from    selling   to    his    partner 

13  One   may   revoke   an   authority  ' '  anything  of  any  kind  or  nature. ' ' 
or  dissolve  a  partnership   in  many  Was  this  effectual;    was  it  in  sub- 
cases, but  one  party  alone  can  not  stance    a    dissolution;     or    was    it 
revoke  a  contract.  merely  a  futile  and  inconsistent  at- 

14  Thus   in    "Wipperman   v.    Stacy  tempt   to    strip    the   partnership    of 
(1891),  80  Wis.  345,  50  N.  W.  336,  all   of   its    significance   without   dis- 
Mechem's  Gas.  376,  one  partner  had,  solving  it?     The  court  held  it  to  be 
by  the  contract,  the  power  to  make  the  latter. 

all    the    purchases    but    of    parties  15  Partnership,  as  to  the  authority 

215 


§  243]  LAW   OF  PARTNERSHIP 

pose  upon  third  persons  whose  rights  are  already  fixed  addi- 
tional burdens  or  responsibilities,  as,  for  example,  to  take  away 
a  debtor 's  right  to  pay  to  either  partner ; 16  but  as  to  the  future 
exercise  of  the  ordinary  incidental  and  implied  powers  affect- 
ing only  the  manner  in  which  the  business  is  to  be  carried  on, — 
the  making  of  this  or  that  new  contract,  the  incurring  of  this  or 
that  new  obligation,  one  of  two  partners  may,  it  is  held,  by  giv- 
ing notice  to  third  persons,  escape  being  bound  by  the  contem- 
plated act  of  his  partner.17 

§243.  If  this  rule  be  sound,  it  must,  it  is  thought,  be 

upon  the  theory  that  where  there  are  but  two  partners — and 
therefore  no  majority  is  possible — and  where  there  is  no  ex- 
press agreement  about  the  matter,  it  is  the  implied  understand- 
ing that  all  of  the  ordinary  incidental  details  of  the  business 
within  its  general  scope  shall  be  from  time  to  time  decided,  if 
question  arises,  by  both,  since  one  can  ordinarily  have  no  more 
authority  than  the  other.  If  then  both  do  not  agree,  i.  e.,  if 
one  dissents,  that  act  shall  not  be  done. 

If  there  are  more  than  two  partners  and  therefore  a  majority 
view  is  possible,  it  may  equally  be  thought  that  such  matters 

necessary    for    a   partner's    protec-  105  Ky.  624,  49  S.  W.  465,  88  Am. 

tion,  e.  g.,  the  power  to  apply  the  St.   E.   320,   20   Ky.   Law   E.   1436, 

assets    to    the    payment    of    debts,  Mechem's  Cas.  380;  Bank  v.  Mason 

etc.,   exhibits   one   of   that  kind   of  (1917),  139  Tenn.   659,  202  S.  W. 

authorities      sometimes      called      a  931;    Johnson  v.   Bernheim    (1877), 

"power  coupled  with  an  interest,"  76  N.   C.   139;   Johnston  v.  Button 

or  a  "power  given  by  way  of  se-  (1855),  27  Ala.  245;  Ellis  v.  Allen 

curity."  (1886),    80    Ala.    515,    2    So.    676; 

Compare     Fidelity     Banking     &  Yeager  v.  Wallace    (1868),  57  Pa. 

Trust  Co.   v.   Kangara   Co.    (1894),  365;    Carr  v.   Hertz    (1895),  54  N. 

95  Ga.  172,  22  S.  E.  50.  J.  Eq.  127,  33  Atl.  194,  Burd.  Cas. 

16  See  Noyes  v.  New  Haven,  etc.,  356;    Wipperman  v.   Stacy   (1891), 
E.  Co.  (1861),  30  Conn.  1.  80    Wis.    345,   50   N.   W.    336,   Me- 

17  See  Leavitt  v.  Peck   (1819),  3  chem's   Cas.    376;    McCord  v.   Call- 
Conn.    125,    8    Am.    Dec.    157,    Me-  away  (1899),  109  Ga.  796,  35  S.  E. 
chem's   Cas.    375;    Monroe    v.    Con-  171;    Gallway    v.    Mathew    (1808), 
ner    (1838),    15    Me.    178,    32    Am.  10  East  264.     Compare  First  Nat. 
Dec.  148,  Gilm.  Cas.  393;   Noyes  v.  Bank  v.   Larson    (1911),    146   Wis. 
New  Haven   E.   E.  Co.    (1861),  30  653,   132   N.   W..  610,  12   Columbia 
Conn.  1;   Dawson  v.  Elrod   (1899),  Law  Eeview  85. 

216 


AUTHORITY    OP    PARTNERS  [§244 

of  detail  as  are  not  expressly  provided  for  have  also  been  left 
to  be  decided  as  they  arise,  but  here  (in  accordance  with  a  com- 
mon tradition  applicable  to  the  determination  of  details  by  a 
group  agreed  upon  a  general  plan),  by  a  majority.  This  point, 
however,  will  be  more  fully  considered  in  a  later  section.18 

§  244.  Of  the  partner  as  the  agent  of  the  partnership. — Ap- 
plying these  considerations,  the  general  rule  may  be  said  to  be 
that  each  partner  is  an  agent — and,  so  far  as  such  a  distinction 
is  material,  a  general  rather  than  a  special  agent — with  implied 
authority  to  bind  the  partners  in  all  matters  falling  within 
the  general  and  usual  scope  of  the  business  as  actually  con- 
ducted; and  that  third  persons  dealing  with  one  partner  as 
such  agent  will  be  protected  if  they  act  in  good  faith,  with 
reasonable  prudence,  and  with  no  notice  of  any  other  limitations 
than  those  which  the  nature  of  the  business  as  ostensibly  car- 
ried on  may  afford.  The  Uniform  Partnership  Act  is  to  the 
same  effect.19 

Greater  authority  may,  of  course,  be  conferred  by  the  express 
or  implied  consent  of  the  partners  previously  given,  or  by  their 
subsequent  ratification;  but  the  rule  stated  refers  to  the  au- 
thority to  be  implied  from  the  nature  of  the  business  and  the 
method  of  transacting  it. 

Special  arrangements  between  the  partners  may  also  diminish 
the  normal  authority  of  a  particular  partner  or  partners,  even 
to  the  point  of  extinction;  but  such  arrangements,  as  has  been 

18  See  post,  §  281.  matter,  and  the  person  with  whom 

19  Sec.    9.     "(1)     Every   partner  he  is  dealing  has  knowledge  of  the 
is  an  agent  of  the  partnership  for  fact  that  he  has  no  such  authority." 
the  purpose  of  its  business,  and  the  In  Pohlman  v.  Taylor  (1874),  75 
act  of  every  partner,  including  the  111.  629,  it  is  said:  "Every  partner 
execution   in   the  partnership   name  possesses  full  and  absolute  author- 
of   any   instrument,   for   apparently  ity  to  bind  all  the  partners  by  his 
carrying   on   in  the  usual  way   the  acts  or  contracts,  in  relation  to  the 
business  of  the  partnership  of  which  business   of  the   firm,   in   the   same 
he  is  a  member  binds  the  partner-  manner  and  to  the  same  extent  as 
ship,  unless  the   partner   so   acting  if  he  held  full  powers  of  attorney 
has  in  fact  no  authority  to  act  for  from  all  the  members." 

the    partnership    in    the    particular 

217 


§245] 


LAW   OF   PARTNERSHIP 


seen,  would  not  ordinarily  be  binding  upon  third  persons  having 
no  notice  or  knowledge  of  them.20 

§  245.  The  Koman  Law,  as  has  been  seen,  did  not  recog- 
nize this  agency  of  one  partner  to  bind  the  others  contractually 
by  reason  of  the  relationship.21 

In  the  case  of  the  so-called  "joint  venture,"  as  distinguished 
from  the  commercial  partnership,  the  authority  of  one  associate 
to  bind  the  others  contractually  as  the  mere  result  of  the  re- 
lation (as  distinguished  from  the  actual  agreement,  practice  or 
appearance)  is  more  doubtful.22 

The  merely  nominal  partner,  not  being  an  actual  partner, 
would  usually  not  be  an  agent  at  all.  He  may  bind  himself,  of 
course.  If  he  alone  has  held  himself  out  as  partner  with  others, 
he  may  not  bind  them.  If  they  have  assented  to  such  holding 
out  or  if  they  have  held  him  out  as  their  partner,  he  may  then 
bind  them.23 


20  gee    Rice   v.    Jackson    (1895), 
171    Pa.    89,    32    Atl.    1036,    ante, 
§235. 

21  See  ante,  p.  xxii,  Introduction. 
In    Hunter's    Roman    Law    (3d 

ed.),  p.  521,  it  is  said:  "The  con- 
tract of  partnership  in  Roman  law 
dealt  solely  with  the  rights  of  part- 
ners as  between  themselves;  and  one 
of  the  partners  had  no  implied  pow- 
er to  bind  the  others,  even  in  mat- 
ters strictly  within  the  business  of 
the  partnership.  One  of  the  part- 
ners might,  indeed,  to  a  qualified 
extent,  be  an  agent  for  the  others, 
but  only  in  the  same  way  as  a 
stranger  to  the  partnership.  This 
peculiarity  is  to  be  attributed  to  the 
slow  and  imperfect  development  of 
agency  in  the  creation  of  con- 
tracts." See,  also,  Roby,  Roman 
Private  Law,  II,  p.  248  et  seq.;  132, 
et  seq. 

22  In  Jones  v.  Gould  (1913),  209 
N.  Y.  419,  103  N.  E.  720,  the  court 
said:      "This    was    not    strictly    a 


partnership,  though  it  had  many  of 
the  features  of  such  a  relation. 
Williams  v.  Gillies,  75  N.  Y,  197. 
It  was  what  is  now  generally  known 
as  a  joint  venture  rather  than  a 
commercial  partnership.  The  auth- 
orities in  some  of  the  states  hold 
that  in  the  prosecution  of  the  ven- 
ture each  party  has  the  same  full 
power  to  bind  his  associates  in  any 
contract  in  regard  to  the  venture 
that  an  ordinary  commercial  partner 
would  have.  We  are  not  now  in- 
clined to  hold  that  doctrine  in  its 
full  integrity,  but  such  a  ruling  is 
not  necessary  to  the  disposition  of 
the  case." 

23  The  Uniform  Partnership  Act, 
sec.  16,  works  this  out  with  con- 
siderable fulness.  See  ante,  §  244, 
also  Appendix.  The  nominal  part- 
ner or  partner  by  estoppel  is  per- 
sonally liable  or  liable  jointly  with 
those  who  consent  to  his  represen- 
tations. As  an  agent  "he  is  an 
agent  of  the  persons  consenting  to 


218 


AUTHORITY    OF    PARTNERS  [§§246,247 

§246.  Partner  has  no  implied  authority  outside  of  scope  of 
business. — The  first  and  most  obvious  limitation  imposed  by 
this  rule  is,  that  one  partner  can  have  no  implied  authority  to 
bind  the  partnership  to  third  persons  in  any  matter  outside 
of  the  scope  of  the  business  as  ostensibly  carried  on.24  Thus, 
as  a  few  of  many  similar  illustrations,  it  is  not  within  the  scope 
of  the  business  of  a  firm  of  lumber  manufacturers  to  subscribe 
for  stock  in  a  plank-road  company;  nor  of  a  firm  of  millers, 
or  planters  and  farmers,  to  carry  on  a  grocery  store;  nor  of 
an  iron  furnace  partnership  to  buy  a  distillery;  nor  of  a  print- 
ing firm  to  undertake  to  sell  pianos ;  nor  of  a  firm  of  millers  and 
grain  dealers  to  speculate  in  futures;  nor  of  a  trading  partner- 
ship to  collect  accounts  for  others,  or  buy  land  for  speculation ; 25 
nor  of  a  firm  of  lawyers  to  undertake  to  collect  debts  or  foreclose 
mortgages  without  pay.  Other  illustrations  will  be  given  under 
special  heads. 

§247.  What  meant  by  scope. — What  is  meant  by  the 
scope  of  the  business  is  not  capable  of  exact  definition,  but,  in 
general,  it  means  the  limits  commonly  and  usually  fixed  to  a 
similar  business  at  that  time  and  place,  and  reasonably  and 

such    representation    to    bind    them  25  See  Barnard  v.  Plank-road  Co. 

to  the  same  extent  and  in  the  same  (1859),  6  Mich.  274,  Mechem's  Gas. 

manner  as  though  he  were  a  part-  334;    Banner   Tobacco   Co.   v.  Jeni- 

ner  in  fact,  with  respect  to  persons  son    (1882),   48    Mich.    459,    12    N. 

who   rely   upon    the    representation.  W.  655,  Mechem's  Gas.  336;  Irwin 

Where  all  the  members  of  the  ex-  v.   Williar    (1883),   110  U.   S.   499, 

isting    partnership    consent    to    the  4  Sup.  Ct.  160,  28  L.  ed.  225,  Gilm. 

representation,  a  partnership  act  or  Gas.     363;     Boardman     v.     Adams 

obligation  results;   but  in  all  other  (1857),     5     Iowa     224,     Mechem's 

cases  it  is  the  joint  act  of  the  per-  Partn.   Gas.  339;    Davis  v.   Dodson 

son  acting  and  the  persons  consent-  (1905),  95  Ga.  718,  22  S.  E.  645, 

ing  to  the  representation. ' '  51  Am.  St.  E.  108,  29  L.  E.  A.  496, 

24  Thus,  also,  the  Uniform  Part-  Mechem  's  Gas.  942,  Burd.  Gas.  338 ; 

nership   Act,  sec.  9:    "(2)    An  act  Humes  v.  O 'Bryan  (1883),  74  Ala. 

of  a  partner   which   is  not  appar-  64;   Waller  v.  Keyes   (1834),  6  Vt. 

ently   for   the   carrying   on   of    the  257;   Pickels  v.  McPherson   (1881), 

business  of  the   partnership   in  the  59   Miss.   216;    Brooks   v.   Hamilton 

usual  way  does  not  bind  the  part-  (1821),  10  Mart.  (La.)  283,  13  Am. 

nership    unless    authorized    by    the  Dec.  328. 
other  partners." 

219 


§  248]  LAW  OF  PARTNERSHIP 

generally  necessary  to  enable  that  business  to  be  carried  on. 
The  usages  of  those  engaged  in  the  same  business  at  the  same 
time  and  place  are  therefore  material  to  be  observed  as  indi- 
cating not  only  what  the  partners  themselves  but  third  persons 
must  have  contemplated  as  falling  properly  within  its  purpose. 
The  previous  practice  and  conduct  of  the  particular  firm  may 
also  be  of  weight  as  indicating  what  the  partners  have  deter- 
mined to  be  authorized.  "  Necessity "  alone  in  a  given  case  is 
not  enough,  nor  is  the  fact  that  benefit  may  have  resulted  from 
the  act;  it  must  fall  within  the  general  and  established  usages 
of  such  a  business,  or  at  least  within  the  usages  of  the  particular 
business. 

"Scope"  is  ordinarily  a  question  of  fact  to  be  determined 
under  proper  instructions  from  the  court,  by  the  jury  (or  other 
triers  of  the  facts)  in  view  of  the  circumstances  of  the  particular 
case ; 26  but  questions  originally  of  fact  may  have  become  crys- 
talized  into  rules  of  law,  admitted  or  undisputed  facts  may 
demand  a  legal  inference,  or  written  agreements  may  require 
legal  interpretation,  and  in  such  cases  the  court  will  decide. 
Mere  questions  of  fact  may  also  be  decided  by  the  court  (by  a 
directed  verdict)  where  only  one  inference  may  reasonably  be 
drawn  from  the  evidence  in  the  case.27 

§248.  Extending  original  scope  by  subsequent  conduct. — 

The  scope  originally  fixed  by  the  partners  for  the  conduct  of 
their  business  may  be  subsequently  enlarged  with  their  consent. 
This  consent  may  be  given  consciously  and  expressly,  or  it  may 
be  given,  perhaps  unconsciously,  by  acquiescence  or  implication. 
As  the  scope  of  the  business  is  extended,  the  range  of  the  im- 
plied authority  of  the  partners  extends  accordingly.23  As  was 

26  See  London  Savings  Society  v.  (1882),  48  Mich.  459,  12  N.  W.  655. 
Sayings    Bank    (1860),    36   Pa.    St.  28  See      Boardman       v.       Adams 
498,  78  Am.  Dee.  390.  (1857),  5  Iowa  224,  Mechem's  Gas. 

27  See  Everitt  v.  Chapman  (1827),  339;  Woodward  v.  Winsliip  (1832), 
6    Conn.    347;     Morgan    v.    Farrel  12  Pick.  (Mass.)  429. 

(1890),  58  Conn.  413,  20  Atl.  614,  In  Eady  v.  Newton  Coal  &  Lum- 

18  Am.  St.  E.  282,  Mechem's  Cas.  ber    Co.    (1905),    123    Ga.   557,   51 

171;  Stundon  v.  Dahlenberg  (1914),  S.  E.  661,  1  L.  R.  A.   (N.  S.)   650, 

184  Mo.  App.  381,  171   S.  W.  37:  with  note,  it  is  held  that  the  origi- 

Banner     Tobacco     Co.     v.     Jcnison  nal  agreements  may  be  extended  by 

220 


AUTHORITY   OP    PARTNERS  [§§249,250 

said  in  one  ease29  in  which  a  firm  of  printers  had  gradually 
added  piano  selling  to  their  business,  "Where  a  partnership 
firm,  embarked  in  a  particular  business  to  which  their  engage- 
ments are  confined,  and  to  which  alone  their  partnership  con- 
tracts extend,  by  mutual  agreement  enlarge  the  sphere  of  their 
operations  and  include  another  branch  of  business,  the  power 
of  each  partner  to  bind  the  firm  by  his  contracts  is  co-extensive 
with  the  whole  business  of  the  partnership ;  and  the  acts  of  each 
member  are  as  binding  on  the  firm  in  the  new  branch  of  busi- 
ness in  which  they  are  engaged  as  they  are  in  the  former  regular 
and  ordinary  business." 

§249.  Consideration  of  particular  authorities. — It  is  ob- 
viously impossible  to  enumerate  all  of  the  powers  which  may 
or  may  not  fall  within  the  scope  of  a  particular  partnership; 
but  the  question  of  the  existence  of  several  has  so  frequently 
arisen  that  they  may  be  grouped  together  as  further  illustra- 
tions of  the  subject.  For  convenience  sake,  the  various  subjects 
may  be  arranged  in  something  of  an  alphabetical  order.  Thus — 

§250.  Admissions,  representations  and  declarations. — 

In  accordance  with  the  ordinary  rules  of  agency,  the  statements, 
representations  and  admissions  of  one  partner  are  not  ad- 
missible against  another,  unless  he  has  in  some  way  assented 
to  them,  either  to  prove  the  fact  of  the  partnership,  or  to  prove 
that  a  given  transaction  apparently  beyond  its  scope  was  in  fact 
a  partnership  transaction ; 30  but  if  the  existence  of  the  part- 
implication  based  upon  the  general  30  See  Strong  v.  Smith  (1892), 
usage  of  the  firm  acquiesced  in  by  62  Conn.  39,  25  Atl.  395;  Taft  v. 
all  of  the  partners;  but  before  one  Church  (1895),  162  Mass.  527,  39 
partner  who  has  not  expressly  N.  E.  283;  Heffron  v.  Hanaford 
agreed  to  the  custom  can  be  held  to  (1879),  40  Mich.  305;  Columbia 
have  acquiesced,  it  must  appear  that  Nat.  Bank  v.  Bice  (1896),  48  Neb. 
he  knew  of  it  and  his  acquiescence  428,  67  N.  W.  165;  First  Nat.  Bank 
must  indicate  his  consent  to  it  as  v.  Conway  (1886),  67  Wis.  210,  30 
the  regular  course  of  dealing  rather  N.  W.  215.  But  where  the  act  is 
than  as  a  departure  from  the  estab-  one  which  he  might  apparently  do 
lished  course  in  a  special  and  iso-  either  for  the  partnership  or  for 
lated  instance.  himself  or  some  third  person,  his 

2£>  Boardman  v.  Adams,  supra.  statements  or  representations  as  to 

221 


§  250]  LAW   OP  PARTNERSHIP 

nership  has  first  been  shown  by  other  evidence,  then  the  ad- 
missions, representations  or  declarations  of  one  partner  made 
during  the  continuance  of  the  partnership,  while  engaged  in 
the  transaction  of  the  partnership  business  and  in  reference 
to  partnership  affairs,  are  admissible  against  the  others.31  Such 
in  substance  is  the  rule  of  the  Uniform  Partnership  Act.32  One 
partner  cannot,  however,  by  his  own  self-serving  admissions  or 
declarations  alone  not  acquiesced  in  by  his  copartners,  deprive 
his  partners  of  their  interests  in  the  firm  property.33 

Where  it  is  desired  to  prove  by  one  partner  either  the  ex- 
istence of  the  partnership  or  who  were  the  partners  composing 
it,  he  should  be  called  as  a  witness.  While  his  extrajudicial 
admissions  are  not  admissible,  his  testimony  on  the  trial  is 
competent.34 

Upon  the  termination  of  the  partnership,  the  authority  of 
each  partner  as  an  agent  to  carry  on  the  business  ordinarily 
ceases,  and  with  it  the  authority  to  make  statements,  represen- 
tations or  admissions  so  far  as  that  authority  springs  from  the 
original  authority  to  carry  on  the  business ;  but,  as  will  be  seen 
hereafter,35  a  partner  may,  after  dissolution,  have  an  authority 
to  act  in  closing  up  its  affairs,  and  out  of  that  fact,  while  he 
is  so  acting  and  with  reference  to  such  acts,  an  authority  to 
make  statements,  representations  or  admissions  may  arise  suit- 
able to  the  occasion  and  limited  by  it.36 

the  one  for  whom  he  then  purported  32  See.  11.  "An  admission  or  rep- 

to    act    would    be    competent.      See  resentation    made    by    any    partner 

Smith  v.  Collins   (1874),  115  Mass.  concerning  partnership  affairs  with- 

388;  Benningcr  v.  Hess   (1884),  41  in    the    scope    of    his    authority    as 

Ohio  St.  64;  Clark  v.  Taylor  (1880),  conferred   by    this    act    is   evidence 

68  Ala.  453.  against  the  partnership." 

31  See      Drumright      v.      Philpot  33  Williams  v.  Lewis   (1888),  115 

(1854),   16   Ga.   424,   60   Am.   Dec.  Ind.  45,  17  N.  E.  262,  7  Am.  St.  E. 

738;    Burgan    v.    Lyell    (1851),    2  403. 

Mich.   102,   55   Am.  Dec.  53,  Burd.  34  See  First  Nat.  Bank  v.  Conway, 

Cas.  312,  Gilm.  Cas.  338*    Griswold  supra. 

v.  Haven  (1862),  25  N.  Y.  595,  82  35  See  post,  §§423-426. 

Am.    Dec.    380;    Eapp    v.    Latham  36  See  Pennoyer  v.  David  (1860), 

(1819),    2    B.    &    Aid.    795,    Ames'  8    Mich.   407,   Mechem's   Cas.   543; 

Cas.  610,  Burd.  Cas.  341;  Brundage  Feigley    v.    Whitaker     (1872),     22 

v.  Melton  (1895),  5  N.  Dak.  72,  63  Ohio    St.    606,    10    Am.    Eep.    778, 

N.  W.  209,  Burd.  Cas.  348.  Mechem's  Cas.  550.     Compare  Mil- 


AUTHORITY    OP    PARTNERS  [§§  251,  232 

§  251.  Agents — Appointment  of. — Each  partner  has  im- 
plied authority  to  employ  on  account  of  the  firm  such  agents 
and  servants  as  the  proper  transaction  of  the  partnership  busi- 
ness may  require.87  This  is  not  a  case  of  the  delegation  by 
one  partner  of  his  authority,  but  an  employment  in  behalf  of 
all  the  partners  by  the  acting  partner  as  the  agent  of  all. 

The  firm  may  act  as  agent.  It  may  be  organized  to  act  as 
agent;  it  may  undertake  the  agency  in  question  as  a  part  of 
its  regular  business,  or  undertake  it  with  the  consent  of  all  as 
a  departure  from  or  an  addition  to  its  regular  business.  "Where 
the  partners  are  appointed  as  individuals,  all  must  ordinarily 
unite  in  executing  the  authority;  but  where  the  firm  is  the 
agent,  any  partner  has  ordinarily  as  much  implied  power  to 
transact  that  business  alone  as  he  would  have  to  transact  alone 
any  other  piece  of  business  in  which  the  firm  is  engaged.88 

§252.  Arbitration. — By   the   weight   of  authority  one 

partner  has  ordinarily  no  implied  power  to  submit  controverted 
partnership  matters  to  arbitration.89  The  reason  is  that  this  is 
not  the  usual  and  ordinary  method  by  which  such  affairs  are 
adjusted.  Proceedings  in  the  regularly  established  courts  is  the 
ordinary  method.  This  is  the  prevailing  rule  whether  the  agree- 
ment to  submit  is  under  seal  or  not,  though  in  a  few  states  an 

ler  v.  Neimerick  (1857),  19  111.  172,  38  See      Deakin      v.      Underwood 

where  it  does  not  appear  that   the  (1887),    37    Minn.   101,    33    N.    W. 

admission  was  made  as  part  of  any  318,    5   Am.   St.   E.    827;    Frost   v. 

act  of  settlement  on  which  the  part-  Erath   Cattle   Co.    (1891),   81    Tex. 

ner  was  engaged.  505,   17   S.  W.   52,   26  Am.   St.  E. 

37  See    Burgan    v.    Lyell    (1851),  831. 

2  Mich.  102,  55  Am.  Dec.  53,  Burd.  39  See  Fancher  v.  Furnace  Co. 
Gas.  312,  Gilm.  Cas.  358;  Mead  v.  (1886),  80  Ala.  481,  2  So.  268; 
Shepard  (1867),  54  Barb.  (N.  Y.)  Walker  v.  Bean  (1886),  34  Minn. 
474;  Sweeney  v.  Neely  (1884),  53  427,  26  N.  W.  232;  Gay  v.  Walt- 
Mich.  421;  Harvey  v.  McAdams  man  (1879),  89  Pa.  St.  453;  Davis 
(1875),  32  Mich.  472;  Carley  v.  v.  Berger  (1884),  54  Mich.  652,  20 
Jenkins  (1874),  46  Vt.  721;  Eeir-  N.  W.  629;  Hoffman  v.  Westlecraft 
den  v.  Stephenson  (1914),  87  Vt.  (1914),  85  N.  J.  L.  484,  89  Atl. 
430,  89  Atl.  465,  Ann.  Cas.  1916  C  1006;  Tillinghast  v.  Gilmore  (1871), 
109;  Bartlett  v.  Powell  (1878),  90  17  E.  I.  413,  22  AtL  942, 
111.  331. 


§  253]  LAW  OP  PARTNERSHIP 

unsealed  agreement  by  one  partner  has  been  held  binding.    The 
power  may,  of  course,  be  conferred  by  the  consent  of  the  other 
partners,  and  would  perhaps  exist  if  the  others  have  abandoned 
the  business  to  his  sole  management  and  discretion. 
The  Uniform  Partnership  Act  so  provides.40 

§253.  Assignments  for  creditors. — Since  such  a  pro- 
ceeding ordinarily  results  in  closing  up  the  business  rather  than 
in  carrying  it  on,  and  is  an  unusual  and  extraordinary  act,  it 
is  settled  by  the  weight  of  authority,  as  a  general  rule,  that 
one  partner  has  no  implied  power  to  make  a  general  assignment 
of  the  partnership  property  for  the  benefit  of  partnership  cred- 
itors; though  it  will  be  valid  if  the  other  partners  previously 
consent,  either  expressly  or  impliedly,  or  subsequently  ratify 
it.  To  this  general  rule  one  exception  is  usually  made:  that 
if  the  other  partners  have  absconded  or  are  absent  so  that  they 
cannot  be  consulted,  or  are  otherwise  incapable  of  assenting 
or  dissenting,  then  the  remaining  partner  may  make  such  an 
assignment  without  their  consent,  if  there  is  a  situation  which 
seems  fairly  to  render  such  a  proceeding  imperative  or  desirable 
and  he  acts  in  good  faith  in  view  of  such  an  emergency.41 

40 Sec.  9.  Subd.  3  (e)  "Unless  hart  (1895),  91  Wis.  513,  65  N.  W. 

authorized  by  the  other  partners  or  60  (where  other  partner  had 

unless  they  have  abandoned  the  absconded) ;  Stein  v.  La  Dow 

business,  one  or  more  but  less  than  (1868),  13  Minn.  412;  Williams  v. 

all  the  partners  have  no  authority  Frost  (1880),  27  Minn.  255,  6  N. 

to  *  *  *  submit  a  partnership  W.  793;  Hill  v.  Postley  (1893),  90 

claim  or  liability  to  arbitration  or  Va.  200,  17  S.  E.  946;  Mayer  v. 

references."  Bernstein  (1891),  69  Miss.  17,  12 

41  See  Loeb  v.  Pierpoint  (1882),  So,  257;  Deckard  v.  Case  (1836), 

58  Iowa  469,  12  N.  W.  544,  43  Am.  5  Watts  (Pa.)  22,  30  Am.  Dec. 

Eep.  122;  Shattuck  v.  Chandler  287,  Gilm.  Cas.  233  (other  partner 

(1889),  40  Kan.  516,  20  Pac.  225,  had  absconded);  Fox  v.  Curtis 

10  Am.  St.  E.  227,  Mechem's  Cas.  (1896),  176  Pa.  52,  34  Atl.  952; 

363,  Gilm.  Cas.  236;  Sullivan  v.  Clafflin  v.  Evans  (1896),  55  Ohio 

Smith  (1884),  15  Neb.  476,  19  N.  St.  183,  45  N.  E.  3,  60  Am.  St. 

W.  620,  48  Am.  Rep.  354;  Eumery  E.  686,  Burd.  Cas.  216;  Steinhart 

v.  McCulloch  (1882),  54  Wis.  565,  v.  Fykrie  (1885),  5  Mont.  463,  6 

12  N.  W.  65;  Coleman  v.  Darling  Pac.  367;  Johnson  v.  Eobinson 

(1886),  66  Wis.  155,  28  N.  W.  367,  (1887),  68  Tex.  399,  4  S.  W.  625; 

57  Am.  Eep.  253;  Voshmik  v.  Urqu-  Bowen  v.  Clark  (1856),  1  Biss. 

224 


AUTHO&ITY   OF    PARTNERS  [§  254 

I 

The  Uniform  Partnership  Act  provides  that  "unless  author- 
ized by  the  other  partners  or  unless  they  have  abandoned  the 
business,  one  or  more  but  less  than  all  the  partners  have  no 
authority  to  assign  the  partnership  property  in  trust  for  cred- 
itors or  on  the  assignee's  promise  to  pay  the  debts  of  the  part- 
nership."42 Unless  the  phrase  "have  abandoned  the  business" 
is  liberally  construed,  it  doubtless  limits  the  rule  generally  agreed 
upon,  as  above  stated,  in  a  number  of  situations. 

An  unauthorized  assignment  might  be  subsequently  ratified 
by  the  other  partners,  but  not,  it  is  held,  so  as  to  cut  off  inter- 
vening rights.43 

§  254. Attorneys — Employment  of. — Inasmuch  as  prose- 
cuting and  defending  ordinary  actions  at  law  arising  in  the 
course  of  the  business,  obtaining  necessary  legal  advice  in  ref- 
erence to  the  conduct  of  the  partnership  affairs,  and  procuring 
proper  legal  assistance  in  the  preparation  of  partnership  con- 
tracts, leases,  and  the  like,  are  common  and  familiar  incidents  of 
partnership  business,  the  implied  authority  of  one  partner  to  em- 
ploy, on  account  of  the  partnership,  attorneys  to  perform  such 
necessary  and  proper  services  cannot  be  doubted,  so  far  as  liability 
for  such  employment  and  its  ordinary  incidents  is  concerned.44 
As  will  be  seen  hereafter,  however,  one  partner  has  usually 
no  implied  authority,  either  in  person  or  through  attorneys  em- 
ployed by  him  alone,  to  subject  his  copartners,  not  personally 
served  with  process  or  personally  appearing,  to  the  jurisdic- 
tion of  a  court  in  such  wise  as  to  enable  a  personal  judgment  or 
decree  to  be  rendered  against  such  copartners.45 

(U.  S.  D.  C.)    128    (other  partner  44  See  Bennett  v.  Stiekney  (1845), 

within  reach  by  telegraph);   Hook  17     Vt.     531;     Wheatley     v.     Tutt 

v.  Stone  (1864),  34  Mo.  329  (deny-  (1867),    4    Kan.    240;    Charles    v. 

ing  authority  though  other  partner  Eshleman   (1879),  5  Col.   107    (not 

absent);  Wilcox  v.  Jackson  (1884),  in    the   case   of   a  mining  partner - 

7  Colo.  521,  4  Pae.  966;    Carrie  v.  ship). 

Cloverdale  Co.    (1891),  90  Cal.   84,  45  See    post,    §§262,    276.      One 

27  Pae.  58   (temporary  absence  not  partner  has  no  implied  authority  to 

abandonment).  enter  an  appearance  in  a  suit,  ex- 

',     42 Sec.  9,  subd.  3  (a).  cept   for   the   partnership,    and   his 

43  See  Coleman  v.  Darling,  supra.  appearance   will  therefore  not  per- 

Mech.  Part.— 15  225 


§§255,256]  LAW  OF  PARTNERSHIP 

§  255. Bills  and  notes. — Authority  to  execute  negotiable 

instruments  is  one  so  capable  of  easy  and  costly  abuse  that  it 
is  reluctantly  implied  in  the  case  of  all  agents  and  represen- 
tatives. Usually  there  must  be  express  authority,  great  necessity, 
or  an  established  usage  in  that  or  similar  enterprises.  In  the 
case  of  partnerships  the  implied  authority  of  one  partner  to 
bind  the  firm  upon  negotiable  paper  is  usually  made  to  depend 
largely  upon  the  trading  or  non-trading  character  of  the  firm. 
This  is  one  of  the  cases  in  which  the  ordinary  usages  of  com- 
mercial firms  have  become  crystalized  into  a  rule  of  law.  There 
come  also  into  operation  the  peculiar  rules  respecting  the  rights 
of  the  bona  fide  purchaser  of  negotiable  paper. 

§256.  — — 1.  In  the  case  of  a  trading  firm,  each  partner 
has  implied  authority  to  bind  the  partnership  by  making,  ac- 
cepting or  indorsing,  in  its  name,  and  in  the  course  of  its  busi- 
ness, a  bill  or  note  for  partnership  purposes;  and  negotiable 
paper  executed  in  the  firm  name  by  one  partner  in  a  trading 
firm  will,  prima  facie,  be  presumed  to  bind  the  firm.  But  if  the 
bill  or  note  was  not  for  partnership  purposes,  but  was  really 
in  fraud  of  the  firm — as  if  it  were  given,  without  the  other 
partners'  consent,  for  the  individual  debt  or  purposes  of  one 
partner, — it  would  not  bind  the  firm  in  the  hands  of  the  orig- 
inal payee  or  of  any  other  person  who  had  notice  of  this  fact, 
or  who  did  not  pay  value  for  it.  In  the  hands  of  a  bona  fide 
holder  for  value  without  notice,  however,  it  would  be  binding 
upon  the  partners,  and  the  latter  would  have  recourse  against 
the  partner  giving  it.  The  original  payee  of  paper  given  for 
the  individual  debt  of  the  partner  (who  of  course  practically 
always  has  notice  of  that  fact),  or  any  other  holder  having 
notice  of  that  fact,  can  only  recover  of  the  firm  by  showing 
affirmatively  that  the  other  partners  previously  authorized  or 
subsequently  ratified  its  execution.46 

sonally   bind   another   partner   not  authority  to  cause  the  appearance 

within     the    jurisdiction     and    not  of   another   partner   to   be   entered 

served     with     process:      Phelps    v.  in  an  action  against  the  firm:  Hall 

Brewer    (1852),    9    Gush.     (Mass.)  v.   Lanning    (1875),  91   U.  S.   160. 

390,  57  Am.  Dec.  56.     After  disso-  23  L.  ed.  271. 
lution   one   partner  has  no   implied          46  See  Redlon  v.  Churchill  (1882), 

226 


AUTHORITY    OP    PARTNERS 


[§257 


§257.  2.  In  the  case  of  a  non-trading  firm,  however, 

one  partner  has,  by  the  weight  of  authority,  no  implied  au- 
thority to  bind  the  partnership  by  making,  accepting  or  indors- 
ing negotiable  paper,  even  though,  in  fact,  done  in  the  course  of 
partnership  business  and  for  its  benefit.  In  such  partnerships 
the  authority  to  make  negotiable  paper  can  only  exist  by  virtue 
of  the  consent  of  the  partners,  the  necessity  of  the  case,  or 
usage  in  that  or  similar  firms.47  Paper  not  so  made  is  there- 


73  Me.  146,  40  Am.  Eep.  345;  Me- 
chanics' Ins.  Co.  v.  Bichardson 
(1881),  33  La.  Ann.  1308,  39  Am. 
Eep.  290;  Sherwood  v.  Snow 
(1877),  46  Iowa  481,  26  Am.  Eep. 
155;  Howze  v.  Patterson  (1875),  53 
Ala.  205,  25  Am.  Eep.  607;  Walsh 
v.  Lennon  (1881),  98  111.  27,  38  Am. 
Eep.  75;  Feurt  v.  Brown  (1886), 
23  Mo.  App.  332;  Buettner  v.  Stein- 
brecher  (1895),  91  Iowa  588,  60 
N.  W.  177,  Burd.  Gas.  326;  Noyes 
v.  Crandall  (1895),  6  S.  Dak.  460, 
61  N.  W.  806,  Burd.  Gas.  335.  Of 
the  trading  or  commercial  sort,  in 
this  connection,  the  following  part- 
nerships have  been  held  to  be: 
stock-brokerage,  including  buying 
and  selling  of  stocks,  Nemeth  v. 
Tracy  (1913),  158  N.  Y.  App.  Div. 
497,  144  N.  Y.  Sup.  901;  banking, 
including  buying,  selling,  discount- 
ing and  re-discounting  commercial 
paper,  McNeal  v.  Gossard  (1897),  6 
Okla.  363,  50  Pae.  159;  First  Nat. 
Bank  v.  Farson  (1919),  226  N.  Y. 
218,  123  N.  E.  490;  manufacturing 
and  selling  goods,  implements,  ma- 
chinery, etc.,  Winship  v.  Bank  of 
United  States  (1831),  5  Peters  (30 
U.  S.)  29,  8  L.  ed.  216;  Holt  v. 
Simmons  (1884),  16  Mo.  App.  97; 
Hoskinson  v.  Eliot  (1869),  62  Pa. 
393;  Phipps  v.  Little  (1913),  213 
Mass.  414,  100  N.  E.  615 ;  plumbing 
contracting,  involving  large  pur- 


chases of  plumbing  fixtures  and  fit- 
tings to  be  installed  in  the  work 
contracted  for,  Marsh  v.  Wheeler 
(1904),  77  Conn.  449,  59  Atl.  410, 
107  Am.  St.  E.  40;  and  of  course, 
those  engaged  in  buying  and  sell- 
ing merchandise,  lumber,  cattle, 
seeds,  etc.,  Walsh  v.  Lennon,  supra; 
Smith  v.  Collins  (1874),  115  Mass. 
388;  Dow  v.  Moore  (1867),  47  N. 
H.  419;  Wagner  v.  Simmons  (1878), 
61  Ala.  143;  First  Nat.  Bank  v. 
Webster  (1915),  130  Minn.  277, 
153  N.  W.  736;  Cotton  Plant  Oil 
Mill  Co.  v.  Buckeye  Cotton  Oil  Co. 
(1909),  92  Ark.  271,  122  S.  W. 
658;  drug-store,  Lindh  v.  Crowley 
(1883),  29  Kan.  756;  saloon,  Phil- 
lips v.  Stanzell  (1895),  28  S.  W. 
(Tex.)  900,  Meehem's  Gas.  944, 
Burd.  Gas.  323. 

47  See  Pease  v.  Cole  (1885),  53 
Conn.  53,  55  Am.  Eep.  53,  22  Atl. 
681,  Mechem's  Partn.  Gas.  344, 
Burd.  Gas.  314,  Gilm.  Gas.  372; 
Phillips  v.  Stanzell  (Tex.  1895),  28 
S.  W.  900,  Mechem's  Gas.  944; 
Burd.  Gas.  323;  Dowling  v.  Ex- 
change Bank  (1892),  145  U.  S. 
512,  12  Sup.  Ct.  928,  36  L.  ed.  795, 
Meehem's  Gas.  356;  Smith  v.  Sloan 
(1875),  37  Wis.  285,  19  Am.  Eep. 
757;  Pooley  v.  Whitmore  (1873), 
10  Heisk.  (Tenn.)  629,  27  Am.  Eep. 
733,  Gilm.  Gas.  360;  Judge  v.  Bras- 
well  (1875),  13  Bush  (Ky.),  67, 


227 


257] 


LAW  OP  PARTNERSHIP 


fore  unenforceable  not  only  in  the  hands  of  the  original  payee, 
but  also  of  a  bona  fide  holder  for  value,  because  the  nature  of 
the  business  is  notice  to  every  one  of  the  limited  powers  of  the 
partners.  A  fortiori  could  neither  the  original  payee  nor  a 


26  Am.  Eep.  185;  Lee  v.  First  Na- 
tional Bank  (1890),  45  Kan.  8, 
25  Pae.  196,  11  L.  E.  A.  238;  Levi 
v.  Latham  (1884),  15  Neb.  509,  48 
Am.  Eep.  361;  Friend  v.  Duryee 
(1879),  17  Fla.  Ill,  35  Am.  Eep. 
89;  Harris  v.  Baltimore  (1890),  73 
Md.  22,  20  Atl.  Ill,  25  Am.  St. 
Eep.  565,  8  L.  E.  A.  677. 

This  rule  has  been  applied  to 
partnerships  carrying  on  the  real 
estate,  loan  and  insurance  business, 
on  commission,  Lee  v.  First  Na- 
tional Bank,  supra;  Deardorf  v. 
Thacher  (1883),  78  Mo.  128,  47 
Am.  Eep.  95;  Schele  v.  Wagner 
(1904),  163  Ind.  20,  71  N.  E.  127 
(but  otherwise  it  was  held  where 
the  firm  bought  and  sold  land  on 
its  own  account,  Adams  v.  Long 
(1904),  114  111.  App.  277);  milling, 
Lanier  v.  McCabe  (1848),  2  Fla. 
32,  48  Am.  Dec.  173;  water-works, 
Broughton  v.  Manchester  Water- 
works (1819),  3  Barn.  &  Aid.  1; 
gas  works,  Bramah  v.  Eoberts 
(1837),  3  Bing.  N.  Gas.  963;  print- 
ing and  publishing,  Pooley  v.  Whit- 
more,  supra;  Bays  v.  Conner 
(1885),  105  Ind.  415,  5  N.  E.  18; 
planting,  Prince  v.  Crawford 
(1874),  50  Miss.  344;  farming, 
Greenslade  v.  Dower  (1828),  7 
Barn.  &  Cr.  635;  Walker  v.  Walker 
(1894),  66  Vt.  285,  29  Atl.  Eep. 
146;  keeping  a  tavern,  Cocke  v. 
Branch  Bank  (1841),  3  Ala.  175; 
carrying  on  a  theater,  Pease  v. 
Cole,  supra;  operating  a  threshing 
machine,  Horn  v.  City  Bank  (1884), 
32  Kan.  518,  4  Pac.  1022;  keeping 


livery-stable,  Levi  v.  Latham,  su- 
pra; carrying  on  a  laundry,  Neale 
v.  Turton  (1827),  4  Bing.  149;  dig- 
ging tunnels,  Gray  v.  Ward  (1856), 
18  111.  32;  practicing  law,  Friend  v. 
Duryee,  supra;  or  medicine,  Cros- 
thwait  v.  Boss  (1839),  1  Humph. 
(Tenn.)  23,  34  Am.  Dec.  613;  saw- 
ing lumber,  Dowling  v.  National 
Bank  (1891),  145  TJ.  S.  512,  36  L. 
ed.  795,  12  Sup.  Ct.  928,  Meehem's 
Gas.  356;  building,  Sniveley  v. 
Matheson  (1895),  12  Wash.  88,  40 
Pae.  628,  50  Am.  St.  E.  877; 
paving,  Harris  v.  Baltimore,  supra; 
well-boring  or  digging,  Vetseh  v. 
Neiss  (1896),  66  Minn.  459,  69 
N.  W.  315,  Burd.  Gas.  328,  Gilm. 
Gas.  379;  operating  moving-pictures, 
Higgins  v.  Beauchamp  [1914],  3 
K.  B.  1192;  buying  land  and  cut- 
ting and  selling  lumber  therefrom, 
National  State  Bank  v.  Noyes 
(1882),  62  N.  H.  35;  mining,  Chil- 
ders  v.  Neely  (1899),  47  W.  Va.  70, 
34  S.  E.  828,  49  L.  E.  A.  468,  81  Am. 
St.  E.  777,  Mechem'sCas.  34;  Cong- 
don  v.  Olds  ,(1896)>  18  Mont.  487, 
46  Pac.  261,  Burd.  Gas.  331;  con- 
structing and  operating  a  rural  tele- 
phone system,  Schumacher  v.  Sum- 
ner  Telephone  Co.  (1913),  161  Iowa 
321,  142  N.  W.  1034,  Ann.  Gas. 
1916  A  201.  Partnership  for  a 
single  venture  only  (see  ante, 
§  16)  would  usually  be  non-trad- 
ing: Gray  v.  Ward  (1856),  18  111. 
32;  Bentley  v.  White  (1842),  42 
Ky.  (3  B.  Mon.)  263,  38  Am.  Dec. 
186. 


228 


AUTHORITY   OF    PARTNERS  [§§258,259 

~bona  fide  holder  recover  if  the  paper  were  given  for  the  in- 
dividual debt  of  a  partner.  To  enable  any  person  to  recover, 
therefore,  upon  negotiable  paper  given  by  a  partner  in  a  non- 
trading  firm,  the  plaintiff  must  be  prepared  to  show  either  such 
consent  of  the  other  partners,  such  necessity,  or  such  usage  as 
will  take  the  case  out  of  the  general  rule.48 

§258. Borrowing   money. — The   authority   to   borrow 

money  rests  upon  substantially  the  same  considerations  as  the 
authority  to  execute  negotiable  paper,  and  is  usually  exercised 
with  it.  In  a  trading  firm  the  authority  impliedly  exists  for 
partnership  purposes,49  but  not,  it  is  said,  in  a  non-trading  firm.60 
In  the  latter  case  it  can  be  justified  only  by  prior  authorization, 
custom,  necessity,  or  subsequent  ratification.  If  the  borrowing 
was  actually  or  ostensibly  authorized,  the  firm  will  be  bound 
though  the  partner  misappropriates  the  money.51  So  if  the 
borrowing  was  ostensibly  authorized  a  ~bona  fide  lender  may 
recover  even  though  the  partner  borrowing  was  actually  ob- 
taining the  money  for  himself.82 

§259.  Buying. — The   distinction  between  trading  and 

non-trading  firms  is  material,  but  not  conclusive  as  to  the  im- 
plied authority  to  buy.  In  the  case  of  the  trading  firm,  whose 
business  it  is,  in  whole  or  in  part,  to  buy  goo4s  for  use  or  sale, 
the  authority  of  each  partner  to  buy  such  goods  must  clearly 

48  See  Eumsey  v.  Briggs   (1893),  (1891),  88  Mich.  549,  50  N.  W.  658; 
139  N.  Y.  323,  34  N.  E.  929.  Prince  v.  Crawford  (1874),  50  Miss. 

49  See    Bothwell     v.     Humphreys  344;     Salt    Lake    Brewing    Co.    v. 
(1795),  1  Esp.  406,  Ames'  Cas.  535,  Hawke  (1901),  24  Utah  199,  66  Pac. 
Burd.    Cas.    313,    Gilm.    Cas.    366;  1058. 

Howze  v.  Patterson  (1875),  53  Ala.  50  See  Harris  v.  Baltimore,  supra. 

205,    25   Am.    Eep.    607;    Walsh    v.  But  see  Hoskinson  v.  Eliot '(1869), 

Lennon   (1881),  98  111.  27,  38  Am.  62    Pa.    St.    393;    Leffler    v.    Rice 

Eep.  75;  Sherwood  v.  Snow  (1877),  (1873),  44  Ind.  103,  Gilm.  Cas.  368, 

46    Iowa   481,    26    Am.    Eep.    155;  though    these    were    probably    both 

Harris  v.  Baltimore  (1890),  73  Md.  trading  partnerships. 

22,  17  Atl.  1046,  20  Atl.  Ill,  985,  25  51  See    National    State    Bank    v. 

Am.  St.  Eep.  565,  8  L.  E.  A.  677;  Noyes  (1882),  62  N.  H.  35. 

Gilchrist  v.  Brande  (1883),  58  Wis.  52  See  Hayward  v.  French  (1859), 

184,  15  N.  W.  817;  Coller  v.  Porter  12  Gray  (78  Mass.)  453. 

229 


§260] 


LAW   OP   PARTNERSHIP 


be  implied.  It  must  also  be  implied  in  the  case  of  a  non-trading 
firm  if  the  purchase  is  within  the  scope  of  the  business  as  actually 
•conducted.58 

The  purchase  may  be  on  credit,  and  may  be  of  either  real 
or  personal  property  within  the  limits  stated. 

If  the  authority  actually  or  ostensibly  exists,  the  firm  is  none 
the  less  bound  because  the  partner  buying  subsequently  mis- 
applied the  goods.64 

An  unauthorized  purchase  may,  of  course,  be  ratified  by  the 
other  partners.56 

§260.  Collecting  and  receiving  payment. — Every  part- 
ner in  a  firm,  whether  trading  or  non-trading,  has,  unless  there 
has  been  an  agreement  to  the  contrary,  implied  authority  to 


53 See  Bond  v.  Gibson  (1808),  1 
Camp.  185,  Mechem's  Gas.  938, 
Amos'  Gas.  537,  Burd.  Gas.  311, 
Gilm.  Gas.  366;  Alley  v.  Bowen- 
Merrill  Co.  (1905),  76  Ark.  4,  88  S. 
W.  838,  113  Am.  St.  E.  73,  Me- 
chnm's  Partn.  Gas.  939;  Hoffmaster 
v.  Hodges  (1908),  154  Mich.  641, 
118  N.  W.  484;  Lynch  v.  Thompson 
(1883),  61  Miss.  354;  Stillman  v. 
Harvey  (1879),  47  Conn.  27;  John- 
ston v.  Trask  (1889),  116  N.  Y.  136, 
22  N.  E.  377,  15  Am.  St.  E.  394,  5 
L.  E.  A.  630;  Ketcham  Bank  v. 
Hagen  (1900),  164  N.  Y.  446,  58  N. 
E.  523;  Davis  v.  Cook  (1879),  14 
Nev.  265;  Kenney  v.  Altvater 
(1874),  77  Pa.  St.  34.  Where  sev- 
eral persons  put  up  a  building  as 
partners  and  one  of  them  buys  brick 
for  the  purpose  without  any  express 
understanding  that  it  was  an  indi- 
vidual purchase,  and  the  brick  are 
used  in  the  building,  the  partners 
are  liable  for  the  price:  Stecker  v. 
Smith  (1881),  46  Mich.  14,  8  N.  W. 
583,  Gilm.  Gas.  367.  Agreement  to 
buy  or  take  back  goods  previously 
sold:  Johnston  v.  Trask,  supra.; 


Other  partner  not  bound  to  seller 
who  knew  purchase  to  be  unauthor- 
ized: Sutton  v.  Weber  (1904),  127 
Iowa  361,  101  N.  W.  775;  Sladen  v. 
Lance  (1909),  151  N.  Car.  492,  66 
S.  E.  449;  or  where  this  was  appar- 
ent from  the  nature  of  the  firm's 
business,  Sargent  v.  Henderson 
(1887),  79  Ga.  268,  5  S.  E.  122.  A 
partner  in  a  firm  engaged  in  selling 
goods  on  commission  has  no  appar- 
ent authority  to  buy  goods  on  credit. 
Alabama  Fertilizer  Co.  v.  Eeynolds 
(1887),  85  Ala.  19,  4  So.  639.* 

See  also  Iroquois  Eubber  Co.  v. 
Griffin  (1919),  226  N.  Y.  297,  123 
N.  E.  369. 

54  Bond  v.  Gibson,  supra;  Kenney 
v.    Altvater,    supra;    Hoffmaster    v. 
Hodges,  supra;    nor   does   the   fact 
that  the  buying  partner  had  planned 
to  cheat  his  partner  defeat  a  recov- 
ery if  the  seller  was  innocent :  Clark 
v.  Johnson  (1879),  90  La.  442. 

55  Porter  v.  Curry  (1869),  50  111. 
319,    99    Am.    Dec.    520,    Mechem's 
Gas.    343,    Gilm.    Cas.    368;     Hoff- 
master v.  Hodges,  supra. 


230 


AUTHORITY    OP    PARTNERS  [§  261 

receive  payment  of  debts  and  other  obligations  due  to  the  firm, 
and  to  give  receipts  or  discharges  therefor.68  In  this  respect  he 
stands,  not  as  a  mere  special  agent  to  collect  or  receive  pay- 
ment, but  as  a  general  agent  with  powers  co-extensive  with 
the  scope  of  the  business.  He  may  settle  an  account  with  a 
debtor  and  take  a  bill  or  note  in  payment,67  though  he  may 
not  ordinarily  take  goods  unless  that  is  customary,68  and,  of 
course,  he  has  no  implied  authority  to  accept  his  own  outstand- 
ing note  in  payment,  or  offset  the  firm  debt  against  one  of  his 
own,  or  accept  goods  for  himself  in  payment  of  the  debt  due 
to  the  firm.69 

Here,  as  in  other  cases  of  course,  if  the  payment  to  the  part- 
ner was  justified,  the  fact  that  such  partner  afterwards  mis- 
appropriated the  money  would  not  affect  the  creditor  if  he  was 
not  a  party  to  the  partner's  default.60 

§261. Compromising  debts. — A  partner's  authority  to 

bind  the  firm  by  the  compromise  of  a  debt  due  to  it  is  frequently 
laid  down  in  general  terms,  and  there  can  be  no  doubt  that 
one  partner  has  authority,  in  the  ordinary  course  of  the  busi- 
ness, to  adjust,  settle  or  compromise  the  claims  which  the  part- 
nership has  or  makes  against  third  persons.  Such  an  adjust- 
ment of  differences  is  not  only  common  but  frequently  necessary. 
Nevertheless  this  authority  is  certainly  not  without  limitation, 
and  must  be  exercised  without  fraud  or  collusion,  in  good  faith 
and  with  reasonable  prudence.61 

56  Allen  v.  Farrington   (1855),  2  (1905),  123  Ga.  557,  51  S.  E.  661,  1 

Sneed  (Tenn.),  526;  Noyes  v.  New  L.   B.   A.    (N.    S.)    650;    Gregg   v. 

Haven,  etc.,  B.  Co.  (1861),  30  Conn.  James    (1825),   Breese    (111.),   143,   . 

1;  Major  v.  Hawkes  (1850),  12  111.  -12  Am.  Dec.  151;  Warder  v.  Newdi- 

298;  Prentice  v.  Elliott   (1883),  72  gate  (1851),  11  B.  Mon.  (Ky.)  174, 

Ga.  154;  Salmon  v.  Davis  (1812),  4  52  Am.  Dec.  566;  Brickett  v.  Downs 

Binn.   (Pa.)    375,  5  Am.  Dec.  410;  (1895),  163  Mass.  70,  39  N.  E.  776; 

Moist 's  Appeal  (1873),  74  Pa.  166;  Farwell     v.     St.     Paul     Trust     Co. 

Huffman  Farm  Co.  v.  Rush  (1896),  (1891),  45  Minn.  495,  48  N.  W.  326, 

173  Pa.  264,  33  Atl.  1013.  22  Am.  St.  E.  742;  Viles  v.  Bangs 

57Heartt  v.  Walsh  (1874),  75  111.  (1874),  36  Wis.  131;  Cotzhausen  v. 

200.  Judd  (1877),  43  Wis.  213. 

58 Lee    v.    Hamilton     (1854),    12  60 See  Huffman  Farm  Co.  v.  Bush, 

Tex.  413.  supra. 

59  See  Eady  v.  Newton  Coal  Co.  61  See     Lindley    on     Partnership, 

231 


§262] 


LAW   OF  PARTNERSHIP 


§262.  — — Confessing  judgment. — One  partner  has  no  im- 
plied authority  to  confess  judgment  or  to  give  a  warrant  of 
attorney  to  confess  judgment  against  the  firm  upon  a  debt  due 
by  it,  though  the  judgment  may  often  be  valid  against  the  con- 
fessing partner  as  an  individual.62  The  Uniform  Partnership 
Act  is  to  the  same  effect  as  respects  the  implied  authority.63 

The  reason  for  the  rule  as  here  given  is  found  in  the  belief 
that  the  act  of  one  partner  in  undertaking  to  confess  a  judg- 
ment against  his  copartner  and  thereby  cutting  the  latter  off 
from  his  opportunity  to  appear  and  be  heard,  is  an  unusual 
act,  not  within  the  ordinary  scope  of  the  business,  and  there- 
fore not  within  the  range  of  a  partner's  implied  authority.  In 
practice  the  question  is  often  complicated  by  the  fact  that  the 
power  of  attorney  given  by  one  partner  to  confess  the  judgment 
was  under  seal,64  for  the  execution  of  which  the  partner's  au- 
thority was  ,inadequate,  as  will  be  seen  in  the  following  section. 

Although  the  authority  is  thus  not  implied,  previous  assent  or 
subsequent  ratification  may  make  the  act  good.66 


(7th  ed.)  161;  Pierson  v.  Hooker 
(1808),  3  Johns.  (N.  Y.)  68,  3  Am. 
Dec.  467;  Noyes  v.  Railroad  Co. 
(1861),  30  Conn.  1;  Hawn  v.  Land 
Co.  (1887),  74  Cal.  418,  16  Pac. 
196;  Dyer  v.  Sutherland  (1874),  75 
111.  583;  Webber  v.  Webber  (1906), 
146  Mich.  31,  109  N.  W.  50;  Allen 
v.  Cheever  (1881),  61  N.  H.  32; 
Stout  v.  Ennis  Nat.  Bank  (1887), 
69  Tex.  384,  8  S.  W.  808. 

62  See  Hier  v.  Kaufman  (1890), 
134  111.  215,  25  N.  E.  217;  Daven- 
port-Mills Co.  v.  Chambers  (1896), 
146  Ind.  156,  44  N.  E.  1109;  North 
v.  Mudge  (1862),  13  Iowa  496,  81 
Am.  Dec.  441;  Morgan  v.  Richard- 
son (1852),  16  Mo.  409,  57  Am.  Dec. 

235,  Mechem's  Gas.  361,  Gilm.  Gas. 
370;  Soper  v.  Fry  (1877),  37  Mich. 

236.  In  Pennsylvania,  see  Boyd  v. 
Thompson    (1893),   153   Pa.    78,   25 
Atl.    769,    34    Am.    St.    Rep.    685; 


Adams  v.  Leeds  (1900),  195  Pa.  70, 
45  Atl.  666;  62  Un.  of  Pa.  L.  Rev. 
621.  In  Virginia,  see  Alexander  v. 
Alexander  (1888),  85  Va.  353,  7  S. 
E.  335,  1  L.  R.  A.  125;  and  in  Louis- 
iana, see  Wilmot  v.  The  Ouachita 
Belle  (1880),  32  La.  Ann.  607.  As 
to  how  the  question  may  be  raised, 
see  Farwell  v.  Huston  (1894),  151 
111.  239,  37  N.  E.  864,  42  Am.  St.  R. 
237;  Alexander  v.  Alexander,  supra. 

63  See.  9.    (3)d.  "Unless  author- 
ized by  the  other  partners  or  unless 
they  have   abandoned  the   business, 
one  or  more  but  less  than  all  the 
partners     have     no     authority     to 
*     *     *     confess  a  judgment." 

64  As   to    this,   see    Alexander    v. 
Alexander,  supra, 

65  See    Bivingsville    Mfg.    Co.    v. 
Bobo  (1858),  11  Rich.   (S.  Car.)  L. 
386;    Overton    v.    Tozer    (1838),    7 
Watts  (Pa.)  331. 


232 


AUTHORITY   OF    PARTNERS  [§263 

§  263.  Deeds,  bonds  and  other  instruments  under  seal. — 

It  is  the  general  rule  that  one  partner  has  no  implied  authority 
to  bind  his  copartners  by  a  deed,  bond,  mortgage  or  other  in- 
strument in  the  firm  name  or  in  the  partners'  names  under 
seal ; 66  though  the  partner  executing  it  may  thereby  bind  him- 
self in  many  cases,  either  upon  the  instrument  itself  or  upon 
an  implied  warranty  of  authority.67  There  is,  in  many  cases, 
the  very  substantial  reason  that  the  act  involving  the  execution 
of  the  sealed  instrument,  like  selling  or  mortgaging  land,  or 
giving  many  kinds  of  bonds,  was  not  within  the  range  of  the 
implied  authority  of  a  partner ;  but  the  case  is  usually  put  upon 
the  generally  well  settled  though  highly  technical  rule  of  the 
common  law  that  authority  for  the  execution  of  instruments 
requiring  a  seal  can  be  conferred  only  by  an  instrument  under 
seal,  and  that  ratification  of  such  an  act  can  be  effected  only  in 
the  same  manner.  It  is  not  enough  to  satisfy  this  rule  that  the 
articles  of  partnership  were  under  seal,  unless  they  also  in  fact 
gave  the  authority.68  Execution  in  the  presence  and  by  the 
request  or  with  the  consent  of  the  other  partners  is  not  within 
the  rule  requiring  authority  under  seal.69  To  sustain  such 
instruments  against  the  other  partners  therefore,  when  executed 
by  a  single  partner,  the  previous  authorization  or  subsequent 
ratification-  by  the  other  partners  must  usually  be  shown.70  In 
accordance  with  the  rule  referred  to,  this  authorization  or  ratifi- 

66  See     Van     Deusen     v.     Blum      Ames'    Gas.   485,   Burd.    Gas.    343, 
(1836),   18   Pick.    (Mass.)    229,   29      Gilm.  Cas.  382. 

Am.  Dec.  582 ;  Sehmertz  v.  Shreeve  69  See  Merchants  Bank  v.   John- 

(1869),  62  Pa.  457,  1  Am.  Rep.  439;  ston  (1908),  130  Ga.  661,  61  S.  E. 

McDonald  v.  Eggleston    (1853),  26  543,  14  Ann.  Cas.  546,  17  L.  B.  A. 

Vt.   154,  60  Am.  Dec.   303;  Fox  v.  (N.  S.)  969. 

Norton    (1861),    9    Mich.    207,   Me-  70  McDonald  v.  Eggleston  (1853), 

chem's   Cas.   362;    Kock  v.  Endriss  26  Vt.  154,  60  Am.  Dee.  303,  Gilm. 

(1893),  97  Mich.  444,  56  N.  W.  847;  Cas.  383;  Russell  v.  Annable  (1871), 

Moore  v.  Stevens   (1883),  60  Miss.  109  Mass.  72,  12  Am.  Rep.  665;  Hull 

809.  v.  Young  (1889),  30  S.  C.  121,  8  S. 

67  See     Van     Deusen     v.     Blum,  E.  695,  3  L.  R.  A.  521.    As  to  the 
supra;  Weeks  v.  Mascoma  Rake  Co.  necessity  of  knowledge  that  a  sealed 
(1877),  58  N.  H.  101.  instrument   was   to   be   ratified,   see 

68  See       Harrison      v.       Jackson  Hull  v.  Young,  supra. 
(1797),  7  T.  R.  (Durnf.  &  E.)  207, 

233 


§264] 


LAW  OF  PARTNERSHIP 


cation  must  be  under  seal,  and  the  English  and  some  American 
cases 71  so  "hold.  But  so  far  as  the  requirement  of  the  seal  is 
concerned,  there  has  been  a  great  relaxation  in  the  partnership 
cases  in  many  of  the  States,  and  it  is  doubtless  the  weight  of 
modern  American  authority  that  this  authorization  or  ratifica- 
tion may  be  effected  by  parol.72 

§  264.  A  release  of  a  firm  obligation  is  an  exception  to 

this  rule  forbidding  the  execution  of  sealed  instruments;  and 
an  act  unnecessarily  done  under  seal  may,  if  otherwise  valid,  be 
sustained  in  many  States  by  the  rejection  of  the  seal  as  sur- 
plusage,73 or  recovery  may  be  had  on  the  original  consideration, 
if  any,  which  preceded  the  giving  of  the  sealed  instrument.74 


( 71  See  Gordon  v.  Funkhouser 
(1902),  100  Va.  675,  42  S.  E.  677. 
72Tisehler  v.  Kurtz  (1895),  35 
Fla.  323,  17  So.  661;  Peine  v. 
Weber  (1868),  47  111.  41;  Fox  v. 
Norton,  supra;  Cady  v.  Shepherd 
(1831),  11  Pick.  (Mass.)  400,  22 
Am.  Dec.  379;  -Golding  v.  Brennan 
(1903),  183  Mass.  286,  67  N.  E. 
239;  Sterling  v.  Bock  (1889),  40 
Minn.  11,  41  N.  W.  236;  Smith  v. 
Kerr  (1849),  3  N.  Y.  144.  In  Me- 
Gahan  v.  Bank  of  Eondout  (1894), 
156  U.  S.  218,  39  L.  ed.  403,  15  Sup. 
Ct.  347,  it  is  said:  "The  settled 
rule  in  this  country  is  that  where  a 
deed  is  executed  on  behalf  of  a  firm 
by  one  partner  the  other  partner 
will  be  bound  if  there  be  either  a 
previous  parol  authority  or  a  subse- 
quent parol  adoption  of  the  act;  and 
that  ratification  may  be  inferred 
from  the  presence  of  the  other  part- 
ner at  the  execution  and  delivery,  or 
from  his  acting  under  it  or  taking 
the  benefits  of  it  with  knowledge." 
73  See  Edwards  v.  Dillon  (1893), 
147  111.  14,  35  N.  E.  135,  37  Am.  St. 
B.  199,  Gilm.  Gas.  387;  Price  v. 
Alexander  (1850),  2  Greene  (Iowa) 


427,  52  Am.  Dec.  526;  Cook  v.  Gray 
(1882),  133  Mass.  106;  Sterling  v. 
Bock,  supra;  Cowan  v.  Cunningham 
(1907),  146  N.  Car.  453,  59  S.  E. 
992;  Schneider  v.  Schmidt  (1913), 
82  N.  J.  Eq.  81,  88  Atl.  179;  Boyd 
v.  Thompson,  supra;  Hocking  v. 
Hamilton  (1893),  158  Pa.  107,  27 
Atl.  836;  Skinner  v.  Dayton  (1822), 
19  Johns.  (N.  Y.)  513,  10  Am.  Dec. 
286.  Thus  if  a  partner  in  selling 
or  transferring  property  for  the 
firm  unnecessarily  does  so  by  a 
sealed  instrument,  the  validity  of 
the  transaction  is  not  impaired: 
Everit  v.  Strong  (1843),  5  Hill  (N. 
Y.)  163,  7  Hill  585;  McCullough  v. 
Sommerville  (1836),  8  Leigh  (Va.) 
415;  Dubois'  Appeal  (1861),  38  Pa. 
231,  80  Am.  Dec.  478. 

74.See  Purviance  v.  Sutherland 
(1853),  2  Ohio  St.  478;  Walsh  v. 
Lennon  (1881),  98  111.  27,  38  Am. 
Eep.  75.  In  such  cases  the  instru- 
ment, while  not  binding  the  part- 
nership, may  be  evidence  that  the 
partner  was  acting  for  the  firm  and 
creating  a  firm  obligation. 

The  creditor  who  seeks  to  recover 
on  the  original  claim  must  usually 


234 


AUTHORITY    OF    PARTNERS  [§§265,266 

Occasional  cases  have  gone  further  and  upheld  the  execution 
of  such  sealed  instruments  as  are  usually  given  in  the  ordinary 
execution  of  the  partnership  business,  without  regard  to  any 
special  authority.76 

The  Uniform  Partnership  Act  also  adopts  this  view.76 

§  265.  Hiring  or  leasing  property. — One  partner  has  im- 
plied authority  to  bind  the  firm  by  contracts  for  the  hiring  of 
such  property  as  the  usual  prosecution  of  the  firm  business  re- 
quires. Thus,  for  example,  one  partner  may  bind  the  firm  by 
a  contract  for  the  leasing  of  premises  on  which  to  carry  on  the 
business  of  the  firm,77  or  for  the  hiring  of  horses  necessary  for 
the  conduct  of  the  partnership  affairs.78  If  the  hiring  was  ap- 
parently within  that  partner's  authority  the  other  partners 
would  be  bound,  even  though  such  partner  subsequently  wrong- 
fully diverted  or  misapplied  the  property  hired.79 

'  §266.  Insurance. — One  partner  has  implied  authority 

to  bind  the  firm  by  contracts  for  the  insurance  of  the  partner- 
ship property.80    In  case  of  loss,  his  authority  extends  to  making 

surrender  the  sealed  note,  etc.,  for  and  accepted  by  it,  though  made  in 

cancellation.  the  name  of  one  partner  only:  Penn 

75 For  example,  a  charter  party,  v.  Kearny  (1869),  21  La.  Ann.  21; 

by  a  partner  in  a  partnership   en-  Marks  v.   Ghumos   (1910),  82  Kan. 

gaged     in     shipping.       Straffin     v.  562,  109  Pae.  397. 

Newell  (1808),  Charl.   (Ga.)   163,  4  As  a  matter  of  pleading,  held  that 

Am.  Dec.  705,  Burd.  Gas.  344.  a  declaration  on  a  lease   made   by 

76  Sec.  9(1)  in  "  including  the  exe-  one   partner   in   a  non-trading  firm 

cution  in  the  partnership  name  of  should  state  facts  which  showed  that 

any  instrument,"  etc.,  makes  no  dis-  he   was  acting   for  the   partnership 

tinction    as    to    sealed    instruments.  and  within  the  scope  of  its  business. 

See,  also,  Sec.  10.  Alsop  v.  Central  Trust  Co.    (1897), 

77Woolsey  v.   Henke   (1905),  125  100  Ky.  375,  38  S.  W.  510,  18  Ky. 

Wis.  134,  103  N.  W.  267;  Seaman  v.  Law  E.  830,  Burd.  Gas.  340. 

Ascherman  (1883),  57  Wis.  547,  15  78  Sweet  v.  Wood  (1893),  18  E.  I. 

N.    W.    788 ;     Stillman    v.    Harvey  386,  28  Atl.  335,  Mechem  's  Gas.  332. 

(1879),  47  Conn.  26;   Smith  v.  Cis-  79  Sweet  v.  Wood,  supra. 

son  (1867),  1  Colo.  29.     As  will  be  80  Hooper    v.     Lusby     (1814),    4 

seen  in  a  later  section,  the  firm  may  Camp.  66;   Peoria  Ins.   Co.  v.  Hall 

be  bound  upon  a  lease  made  for  it  (1864),  12  Mich.  202. 

235 


267] 


proofs  of  loss  81  and  to  the  settlement  of  the  loss  with  the  in- 
surance company.82  He  may  also  bind  the  firm  by  consenting 
to  the  cancellation  or  surrender  of  a  policy.83 


§267. 


Mortgages  and  pledges. — The  implied  authority 


of  one  partner,  in  borrowing  money  for  the  partnership,  to  give 
the  usual  form  of  security,  including  pledge  or  mortgage  of  the 
personal  property  of  the  firm  to  secure  the  money  borrowed, 
seems  to  be  co-extensive  with  the  authority  to  borrow.8*  In 
respect  of  mortgages  and  pledges  to  secure  partnership  indebted- 
ness, previously  contracted,  the  authorities  are  not  in  harmony, 
but  the  prevailing  rule  is  that  one  partner  has  the  implied  au- 
thority to  mortgage,  certainly  part,  and  usually  all,  of  the  prop- 
erty of  the  firm  kept  for  sale,85  to  secure  the  payment  of  the 
firm  debts.86  As  to  that  not  kept  for  sale,  the  authority  of  a 


81  Myers  v.  Council  Bluffs  Ins.  Co. 
(1887),  72  Iowa  176,  33  N.  W.  453. 

82  Brown    v.    Hartford    Ins.    Co. 
(1875),  117  Mass.  479. 

83  Hillock    v.    Traders'    Ins.    Co. 
(1884),  54  Mich.  531,  20  N.  W.  571. 

84  See  ante,  §  258. 

Since  a  partner  in  a  non-trading 
firm  has  usually  no  implied  author- 
ity to  borrow  money,  he  would  have 
no  implied  authority  to  pledge  firm 
property  for  money  borrowed. 
Harris  v.  Baltimore  (1890),  73  Md. 
22,  17  Atl.  1046,  25  Am.  St.  E.  565, 
8  L.  R.  A.  677,  20  Atl.  Ill,  985. 

85  Since     the     ordinary     implied 
authority  of  the  partner  is  to  carry 
on  the  business  rather  than  to  wind 
it  up  or  cripple  it,  a  distinction  be- 
tween   mortgaging    or    pledging    a 
part  only  rather   than   all,  or  that 
kept  for  sale  rather  than  that  whose 
possession   is   essential   to   continue 
the   business,   seems  in  many  cases 
to  be  an  important  and  natural  one. 
(See  the  Uniform  Partnership  Act, 
Sec.  9,  (3)   c.)     So,  in  many  cases, 


the  distinction  is  important  between 
ordinary  situations  when  the  busi- 
ness is  going  on  normally,  and  those 
wherein  an  emergency  exists  which 
may  justify  unusual  measures. 

86  See  Tapley  v.  Butterfield 
(1840),  1  Mete.  (Mass.)  515,  35 
Am.  Dec.  375,  Burd.  Gas.  211;  Don- 
ald v.  Hewitt  (1859),  33  Ala.  534, 
73  Am.  Dec.  431 ;  Eobards  v.  Water- 
man (1893),  96  Mich.  233,  55  N.  W. 
662;  Hage  v.  Campbell  (1891),  78 
Wis.  572,  47  N.  W.  179,  23  Am.  St. 
R.  422,  Mechem's  Gas.  609;  Citi- 
zens' Nat.  Bank  v.  Johnson  (1890), 
79  Iowa  290,  44  N.  W.  551;  Mc- 
Carthy v.  Seisler  (1891),  130  Ind. 
63,  29  N.  E.  407;  Phillips  v.  Furni- 
ture Co.  (1890),  86  Ga.  699,  13  S.  E. 
19;  Horton  v.  Bloedorn  (1893),  37 
Neb.  666,  56  N.  W.  321;  Letts- 
Fletcher  Co.  v.  McMaster  (1891),  83 
Iowa  449,  49  N.  W.  1035;  Union 
Bank  v.  Kansas  City  Bank  (1890), 
136  U.  S.  223,  10  Sup.  Ct.  1013,  34 
L.  ed.  341;  Keck  v.  Fisher  (1875), 
58  Mo.  532. 


236 


AUTHORITY    OF    PARTNERS 


[§268 


single  partner  to  mortgage  it  all  would  seem  to  be  subject  to 
substantially  the  same  limitations  as  the  authority  to  assign 
for  the  benefit  of  creditors,87  i.  e.,  the  existence  of  some  exigency 
and  the  inability  to  consult  with  the  others. 

But  one  partner  has,  of  course,  no  implied  authority  to  pledge 
or  mortgage  the  partnership  property  to  secure  his  own  private 
debts,  and  of  this  the  party  taking  it  presumptively  has  knowl- 
edge.88 The  latter  can  only  hold,  as  a  rule,  where  he  can  work  an 
estoppel  against  the  claims  of  the  other  partners.89 

§268.  With  respect  of  partnership  real  estate,  the  case 

is  less  simple.  If  it  were  land  kept  or  held  for  sale,90  as  dis- 
tinguished from  basic,  essential  property  or  plant,  the  authority 
of  one  partner  to  use  it  for  the  purpose  of  securing  the  payment 
of  firm  debts  would  usually  be  implied;  though,  because  of  the 
technical  rules  relating  to  the  execution  of  deeds  and  similar 
conveyances  by  one  partner,91  he  could  ordinarily  pass  equitable 
titles  only  rather  than  legal,92  unless  the  legal  title  happened 
to  stand  in  his  name.93 


8V  One  partner  alone,  without  con- 
currence of  others  who  were  acces- 
sible, held  not  to  have  implied  au- 
thority to  practically  terminate  the 
business  by  mortgaging  all  the 
tangible  property  of  the  firm.  Mc- 
Grath  v.  Cowen  (1898),  57  Ohio  385, 
49  N.  E.  338  (citing  Sloan  v.  Moore 
(1860),  37  Pa.  217;  Osborne  v. 
Barge  (1887),  29  Fed.  725).  See, 
also,  Carr  v.  Hertz  (1895),  54  N.  J. 
Eq.  127,  33  AtL  194;  Ellis  v.  Allen 
(1886),  80  Ala.  515,  2  So.  676;  Eock 
v.  Collins  (1898),  99  Wis.  630,  75 
N.  W.  426. 

88  See  Livingston  v.  Roosevelt 
(1809),  4  Johns.  (N.  Y.)  251,  4  Am. 
Dec.  273;  Stockdale  v.  Ullery 
(1860),  37  Pa.  486,  78  Am.  Dee. 
440;  Deeter  v.  Sellers  (1885),  102 
Ind.  458,  1  N.  E.  854;  Oliphant  v. 
Markham  (1891),  79  Tex.  543,  15  S. 
W.  569,  23  Am.  St.  Eep.  363.  Such 
a  mortgage  might,  however,  often  be 


made  effective  upon  the  interest  of 
the  partner  making  it,  i.  e.,  subject 
to  the  settlement  of  proper  partner- 
ship claims.  Patterson  v.  Atkinson 
(1897),  20  E.  I.  102,  37  AtL  532. 

89  Compare     Brickett     v.     Downs 
(1895),  163  Mass.  70,  39  N.  E.  776; 
Todd  v.  Lorah  (1874),  75  Pa.  155; 
Locke  v.   Lewis   (1878),  124  Mass. 
1,  26  Am.  Eep.  631. 

90  See  Eovelsky  v.  Brown  (1891), 
92  Ala.  522,  9  So.  182,  25  Am.  St. 
E.  83,  Mechem  's  Cas.  832. 

91  See  ante,  §§  263,  264. 

92  See  Long  v.  Slade  (1898),  121 
Ala.    267,    26    So.    31,    which   relies 
upon  the  theory    (see  ante,   §  163) 
that  partnership  land  is  in  equity 
regarded    for    partnership   purposes 
as  personalty. 

93  See      Chittenden     v.      German- 
American    Bank    (1880),   27    Minn. 
143,  6  N.  W.  773. 


237 


§§  269,  270]  LAW   OF   PARTNERSHIP 

§269.  A  sole  managing  partner,94  or  a  solvent  partner 

whose  partner  has  become  a  bankrupt,95  or  a  partner  left  to  bear 
the  brunt  by  one  who  has  absconded,96  may  easily  be  found  to 
have  an  enlarged  authority;  and,  as  will  be  seen  hereafter,97  a 
surviving  partner  is  usually  in  the  situation  of  a  general  ad- 
ministrator of  the  partnership  estate. 

§270.  Notice. — Notice  to  or  knowledge  of  one  partner 

in  relation  to  partnership  matters  is,  in  general,  notice  to  or 
knowledge  of  the  partnership.98  Although  not  all  of  the  ques- 
tions have  arisen  in  partnership  cases,  the  rules  applicable  in 
agency  would  doubtless  apply,  i.  e.,  that  the  notice  or  knowl- 
edge will  be  imputed  if,  and  only  if,  acquired  in  relation  to  the 
partnership  business  and  either  during  the  partnership  or,  ac- 
cording to  what  is  probably  the  weight  of  authority,  before  its 
formation  if  still  remembered,  or  so  soon  before  its  creation 
that  the  partner  must  be  presumed  to  have  remembered  it.99 
The  exceptions  to  the  general  rule  would  also  doubtless  apply 
here  if  there  was  a  duty  not  to  disclose  or  if  the  partner  were 
really  acting  adversely  or  were  colluding  with  the  party  claim- 
ing the  benefit  of  the  notice,  to  defraud  the  partnership.1 

The  Uniform  Partnership  Act  also  imputes  notice  to  or  knowl- 
edge of  another  partner  than  the  one  acting  where  the  partner 
who  had  it  "reasonably  could  and  should  have  communicated  it 
to  the  acting  partner."  2 

94 See  O'Neal  v.  Judsonia  Bank  vira  v.  Silvey  (1918),  —  Cal.  App. 

(1914),   111  Ark.  589,   164   S.   W.  — ,  176  Pac.  371. 

295.  99  See    Mechem    on    Agency    (2d 

95  See  Ogden  v.  Arnot  (1883),  29  ed->,   §§  1802-1842. 

Hun  (N.  Y.)  146,  Mechem 's  Cas.  See  remarka  of  Jewel,  M.  R.,  in 
996,  Burd.  Cas.  461.  Williamson  v.  Barbour  (1877),  9  Ch. 

96  See  Hamill  v.   Hamill    (1867),      D>  529'  535' 

27    Md.    679;     Sullivan    v.     Smith          Notice  not  imputed  unless  partner 

(1884),  15  Neb.  476,  19  N.  W.  620,      ™8  act"\as  agent _f"  the  ^^ 

48  Am   T?  *<u  shlp'     Anthonv  v-  Jeffress    (1916), 

*  Am.  K.  d54.  172  N>  Car   3        9Q  g^  K  Ba]d 

97  See  post,  §§  402,  403.  ^  y>  Leonafd  (lg67)    ^  ^ 
98 See  Tucker  v.  Cole  (1882),  54      94  Am   Dec   324> 

Wis.  539;  Holton  v.  McPike  (1881),  i  See     Bignold     v.     Waterhouse 

27    Kan.     286;     Herbert    v.    Odlin  (1813),    1    Maule   &   Sel.    255;    Ex 

(1860),  40  N.  H.  267;   Rowland  v.  parte  Heaton  (1819),  Buck,  386. 

Davis   (1879),  40  Mich.  546;   Fere-  2  Sec.  12.     "Notice  to  any  part- 

238 


AUTHORITY   OF    PARTNERS 


[§271 


§271. 


Within  the  operation  of  this  rule  of  notice  fall 


a  great  variety  of  cases — formal  or  informal  notice  to  one  part- 
ner of  adverse  or  outstanding  liens,  mortgages  or  other  inter- 
ests,3 formal  notice  to  perform  or  receive  performance  of  con- 
tracts,4 notices  of  dishonor,6  notices  to  quit,6  and  the  like. 

Not  within  the  rule  would  be  cases  in  which  the  partner  was 
not,  at  the  time,  acting  for  the  partnership,  as  where  he  wrong- 
fully appropriates  trust  funds  in  his  possession  to  the  payment 
of  his  agreed  contribution  to  the  partnership  capital,  of  which 
fact  the  other  partners  were  ignorant,  and  the  like.7 

Clearly  also  this  rule  does  not  apply  to  ordinary  legal  process, 
— that  must  be  personally  served  upon  every  partner  against 
whom  a  personal  judgment  is  sought,8  although  less  than  per- 
sonal service  on  each  may  at  times  by  statute  sustain  a  judg- 
ment good  against  firm  property,  as  well  as  against  the  part- 
ners actually  served.9  To  this  extent  the  partnership  is  often 
regarded  as  a  distinct  entity. 


ner  of  any  matter  relating  to  part- 
nership affairs,  and  the  knowledge 
of  the  partner  acting  in  the  particu- 
lar matter,  acquired  while  a  partner 
or  then  present  to  his  mind,  and  the 
knowledge  of  any  other  partner  who 
reasonably  could  and  should  have 
communicated  it  to  the  acting  part- 
ner, operate  as  notice  to  or  knowl- 
edge of  the  partnership,  except  in 
the  case  of  a  fraud  on  the  partner- 
ship committed  by  or  with  the  con- 
sent of  that  partner." 

3  See  Tucker  v.   Cole    (1882),   54 
Wis.  539,  11  N.  W.  703;  Adams  v. 
Ashman  (1902),  203  Pa.  536,  53  Atl. 
375;    Dresser   v.    Wood    (1895),    15 
Kan.  344. 

4  See  MeFarland  v.  Crary  (1828), 
8    Cow.    (N.    Y.)    253;    Eenfro    v. 
Adams    (1878),   62  Ala.  302;    Nott 
v.  Downing   (1834),  6  La.  680,  26 
Am.  Dec.  491. 

5  See  Gates  v.  Beecher  (1875),  60 
N.   Y.   518,  19  Am.   Eep.  207,  Me- 
chem's  Gas.  1020. 


6  Where   the   firm   is   the   tenant. 
See  Walker  v.   Sharpe    (1869),  103 
Mass.  154. 

7  See  Englar  v.  Offutt  (1889),  70 
Md.  78,  16  Atl.  497,  14  Am.  St.  R. 
332,  Meehem's  Cas.  398;  Gilruth  v. 
Decell  (1894),  72  Miss.  232,  16  So. 
250;  Penn  v.  Folger  (1899),  182  111. 
76,    55    N.    E.    192;    Bienenstok    v. 
Ammidown    (1898),   155  N.   Y.  47, 
49  N.  E.  321. 

8  Pee  Wood  v.  Watkinson  (1846), 
17  Conn.  500,  44  Am.  Dec.  562;  Mc- 
Doel  v.  Cook  (1848),  2  N.  Y.  110; 
Allen  v.  Chadsey  (1849),  1  Ind.  399, 
1  Smith  200;  Swift  v.  Green  (1858), 
20  111.  173;  Hall  v.  Lanning  (1875), 
91  U.  S.  160,  23  L.  ed.  271 ;  Mitchell 
v.  Greenwald  (1870),  43  Miss.  167; 
Mason   v.   Eldred    (1867),    6   Wall. 
(TJ.   S.)    231,    18   L.   ed.   783,   Me- 
ehem's Cas.  433. 

9  See  Barnes  v.  Colorado,  etc.,  E. 
Co.    (1908),  42   Colo.   461,  94  Pac. 
570;  Heaton  v.  Schaeffer  (1912),  34 
Okla.  631,  126  Pac.  797,  43  L.  E.  A. 


239 


§272] 


LAW  OP  PARTNERSHIP 


§272. 


Paying1  debts. — Unless  the   contrary  has  been 


agreed  upon,  each  partner  has  implied  authority  to  pay  the  firm 
debts  out  of  the  firm  funds;  and  he  may  sell  or  transfer  the 
firm  property  in  payment  of  firm  debts  under  the  same  condi- 
tions at  least  that  he  might  pledge  or  mortgage  it  for  the  pur- 
pose of  securing  their  payment,10  and  many  cases  state  the  rule 
still  more  positively.11  He  has  no  implied  authority,  of  course, 
to  pay  his  private  debt  with  partnership  funds,  and  cannot  law- 
fully transfer  partnership  property  in  satisfaction  of  such  a 
debt,12  though  he  might  transfer  his  residuary  interest  therein 
for  such  a  purpose.  Property  or  credits  actually  belonging  to 
the  partnership  but  caused  or  permitted  by  the  other  partners 
to  appear  to  belong  to  one  partner  only,  would  be  subject  to 
a  different  rule  for  the  protection  of  a  bona  fide  transferee.13 
As  will  be  seen  hereafter,14  each  partner  for  his  .own  protec- 


(N.  S.)  540;  Goldstein  v.  Fox 
(1912),  22  N.  Dak.  636,  135  N.  W. 
180,  40  L.  R.  "A.  (N.  S.)  566; 
Brumwell  v.  Stebbins  (1891),  83 
Iowa  425,  49  N.  W.  1020;  Rickman 
v.  Rickman  (1914),  180  Mich.  224, 
252,  146  N.  W.  609,  Ann.  Gas.  1915 
C  1237;  Richard  v.  Allen  (1887), 
117  Pa.  199,  11  Atl.  552,  2  Am.  St. 
R.  652;  First  Nat.  Bank  v.  Greig 
(1901),  43  Fla.  412,  31  So.  239. 

10  See  "Oilman  v.  Myrick   (1890), 
93  Ala.  532,  8  So.  410;  Hanchett  v. 
Gardner  (1891),  138  111.  571,  28  N. 
E.  788;   Russell  v.  Leland   (1866), 
12  Allen  (Mass.)  349;  Waite  v.  Vin- 
son   (1894),  14  Mont.  405,  36  Pac. 
828;   Mabbett  v.  White   (1855),  12 
N.    Y.   442;    Graser    v.    Stellwagen 
(1862),  25  N.  Y.  315. 

11  Thus  in  Graser  v.   Stellwagen, 
supra,   it  is  said  to   be  settled  in 
New  York  that  a  single  partner  has 
the  power,  in  the  absence  of  fraud, 
notwithstanding  thd   dissent  of  his 
copartner,  to  transfer  all  the  prop- 
erty of  the  partnership  in  payment 


of  one  or  more  debts  of  such  part- 
nership. In  Mabbett  v.  White, 
supra,  it  is  held  that  the  fact  that 
the  firm  is  insolvent,  and  that  a 
preference  is  given  to  one  creditor, 
does  not  alter  the  rule. 

12  See  Cannon  v.  Lindsey  (1887), 
85  Ala.  198,  3  So.  676,  7  Am.  St. 
R.  38;  Janney  v.  Springer   (1889), 
78  Iowa  617,  43  N.  W.  461,  16  Am. 
St.  R.  460,  Gilm.  Cas.  243;  Brickett 
v.  Downs  (1895),  163  Mass.  70,  39 
N.  E.  776;  Todd  v.  Lorah  (1874), 
75     Pa.     155;     Hartley     v.     White 
(1880),  94  Pa.  31,  Gilm.  Cas.  245; 
Rogers     v.     Betterton     (1894),     93 
Tenn.  630,  27  S.  W.  1017.    But  see 
Warren  v.  Martin  (1888),  24  Neb. 
273,  38  N.  W.  849. 

13  See  Locke  v.  Lewis  (1878),  124 
Mass.  1,  26  Am.  Rep.  631;  Reid  v. 
Hollinshead  (1825),  4  B.  &  Cr.  867, 
7  Dow.  &  Ry.  444.     Money  and  ne- 
gotiable   instruments    are    governed 
by  special  rules. 

14  See  post,  Ch.  XIX. 


240 


AUTHORITY    OP    PARTNERS  [§273 

tion  has  ordinarily  a  right,  commonly  spoken  of  as  a  lien,  which 
enables  him  to  secure  the  application  of  the  partnership  assets  to 
the  payment  of  the  partnership  debts,  and  of  this  right  he  can- 
not be  deprived  without  his  own  consent.  His  authority,  al- 
ready stated,  to  himself  apply  the  partnership  property  to  the 
satisfaction  of  the  partnership  debts,  is  in  the  nature  of  a  power 
coupled  with  an  interest  or  a  power  given  by  way  of  security, 
and  cannot  be  absolutely  revoked  by  his  copartner,15  even  though 
it  should  be  conceded  that  there  might  be  effective  dissent  as 
to  its  exercise  in  a  particular  case. 

§  273.  While  he  is  not  obliged  to  do  so,  one  partner  may 

advance  his  own  money  to  pay  a  partnership  debt  (the  claims 
of  his  individual  creditors  not  being  involved),  and  be  allowed 
the  amount  in  a  partnership  accounting. 

Firm  funds  paid  generally  by  a  partner  to  a  firm  creditor 
to  whom  such  partner  is  also  individually  indebted,  must  be 
applied  by  the  creditor  upon  the  partnership  debt  and  not  upon 
the  individual  one  unless  the  other  partners  consent,16  and  even 
with  such  consent  such  an  application  might  often  be  impeached 
by  firm  creditors.17  The  application  of  individual  funds  to  part- 
nership claims 18  may  involve  corresponding  difficulties,19 

15  See  Mabbett  v.  White,  supra;  the  partner  who  seeks  to  pay  them 

Graser  v.   Stellwagen,  supra;  Blod-  may    otherwise    be    held    personally 

gett    v.    American    National    Bank  liable,  and  which  he  desires  to  pay 

(1881),  49  Conn.  9,  24.  with   property   partly    belonging   to 

It  is  true  that  the  contrary  is  as-  him  and  contributed  to  the  partner- 

serted     in     Hanchett     v.     Gardner,  ship  for  that  very  purpose. 

supra,   but    it    is   believed  that   the  16  See      Cornells      v.       Stanhope 

rule,  so  broadly  stated,  is  unsound,  (1883),  14  R.  I.  97;    Flarsheim  v. 

and  it  is  not  sustained  by  the  cases  Brestrup    (1890),  43  Minn.  298,  45 

there  cited  in  its  support.     In  Hal-  N.    W.    438;     Farris    v.    Morrison 

stead   v.    Shepard    (1853),    23    Ala.  (1899),  66  Ark.  318,  50  S.  W.  693; 

558,  cited  by  the  court,  the  debt  to  Nichols  v.  Thomas  (1915),  51  Okla. 

be  paid  was  not  a  firm  debt  but  the  212,  151  Pac.  847,  L.  E.  A.  1916  B 

private  debt  of  one  partner.     There  908       (transferee       charged      with 

is  a  marked  distinction  between  re-  notice), 

voking   authority   of  a  partner   for  17  See  post,  §  444. 

new  purchases,  borrowings,  and  the  18  See  Miles  v.  Ogden  (188?.)    54 

like,  and  revoking  authority  to  pay  Wis.  573,  12  N.  W.  81 

debts    already    incurred,    for    which  19  See  post,  §  445. 
Mech.  Part.— 16                     241 


§  274]  LAW  OP  PARTNERSHIP 

§  274.  Sales. — Each  partner  has  ordinarily  implied  au- 
thority, resulting  from  the  very  nature  of  the  case,  to  sell,  assign 
or  dispose  of,  in  the  regular  course  of  business,  so  much  of  the 
partnership  personalty  as  is  kept  for  sale.  This  is  most  strongly 
exemplified,  of  course,  in  the  case  of  the  trading  partnership 
whose  regular  business  it  is  to  buy  and  sell ;  but  it  would  also 
be  true  pro  tanto  in  other  partnerships  which  had  property 
held  or  kept  for  sale.  There  seems  to  be  no  limit  upon  the 
amount  of  such  property  which  he  may  thus  sell,  even  though 
it  be  the  whole  property  of  the  firm,  and  he  may  pass  the  entire 
title  to  it.20  He  may  also  sell  or  transfer,  in  the  course  of  the 
business,  choses  in  action  and  other  intangible  property  of  the 
firm,  such  as  its  accounts  and  bills  receivable,  patent-rights, 
and  the  like.21  And  upon  the  sale  he  may  give  such  warranties 
of  title  or  quality,  or  may  make  such  incidental  contracts  in 
relation  thereto,  as  are  usually  made  in  like  cases. 

The  implied  authority  of  one  partner,  arising  merely  from 
the  fact  of  the  partnership,  to  sell  the  entire  property  of  the 
firm  is,  by  the  weight  of  authority,  limited  to  that  kept  for 
sale,  and  does  not  include  the  authority  to  sell  that  kept  for 
the  purposes  of  carrying  on  the  business,  and  the  sale  of  which 
would  defeat  or  prevent  the  further  prosecution  of  the  busi- 
ness.22 The  necessity  of  paying  debts  or  some  exigency  requiring 

20  See  Ellis  v.  Allen    (1886),  80  598,  69  N.  J.  L.  452,  55  Atl.  1133; 
Ala.  512,  2  So.  676  (what  was  said  Clarke  v.  Hogeman   (1878),  13  W. 
in  this  case  about  one  partner's  dis-  Va.  718;   First  Nat.  Bank  v.  Free- 
sent    was   pure    dictum} ;    Crites   v.  man  (1882),  47  Mich.  408,  11  N.  W. 
Wilkinson    (1884),   65   Gal.   559,   4  219;  Mills  v.  Barber  (1810),  4  Day 
Pac.  567;  Mabbett  v.  White  (1855),  (Conn.)  428. 

12  N.  Y.  442,  Burd.  Gas.  212;  Graser  22  See  Lowman  v.  Sheets   (1890), 

v.  Stillwagen  (1862),  25  N.  Y.  315;  124  Ind.  417,  24  N.  E.  351,  7  L.  E. 

Schneider  v.  Sansom  (1884),  62  Tex.  A.  784,  Mechem's  Gas.  367;    Sloan 

201;  Boswell  v.  Green  (1856),  25  N.  v.  Moore  (1860),  37  Pa.  217,  Gilm. 

J.  L.  390;  Clark  v.  Eives  (1863),  33  Cas.  231;    Carrie  v.   Cloverdale  Co. 

Mo.  579.  (1891),  90  Cal.  84,  27  Pac.  58;  Cay- 

21  See    Gerli    v.    Poidebard    Silk  ton  v.  Hardy  (1858),  27  Mo.  536; 
Mfg.   Co.   (1894),  57  N.  J.  L.  432,  Blaker   v.    Sands    (1883),    29    Kan. 
31  Atl.  401,  51  Am.  St.  B.  611,  30  551;  McGrath  v.  Cowen  (1878),  57 
L.   E.   A.   61 ;    Sullivan   v.   Visconti  Ohio  385,  49  N.  E.  338 ;  Eutherf ord 
(1902),   68  N.   J.   L.   543,  53   Atl.  v.  McDonnell  (1899),  66  Ark.  448, 

242 


AUTHORITY   OF    PARTNERS 


[§274 


action  when  the  other  partners  cannot  be  consulted  may  extend 
the  authority  even  to  the  latter  class  of  property. 

The  authority  to  sell  is,  of  course,  limited  to  sales  apparently 
on  the  partnership  account  only  and  not  for  the  benefit  of  the 
selling  partner  alone ; 23  though  where  the  other  partners  cause 
or  permit  the  selling  partner  to  appear  as  the  individual  owner 
bona  fide  purchasers  from  him  are  usually  protected.24 

51  S.  W.  1060;  Drake  v.  Thyng 
(1881),  37  Ark.  228.  See  elaborate 
Note  in  L.  E.  A.  1918  A  927. 

Under  the  code  in  Oklahoma,  a 
single  partner  has  no  implied  au- 
thority ''to  dispose  of  the  whole  of 
the  partnership  property  at  once, 
unless  it  consists  entirely  of  mer- 
chandise, "  or  * '  to  do  any  act  which 
would  make  it  impossible  to  carry  on 
the  ordinary  business  of  the  partner- 
ship."  This  would  make  invalid  a 
sale  by  a  single  partner  of  the  toofe, 
building,  business,  etc.,  as  well  as 
the  stock.  Phillips  v.  Thorp  (19,03), 
12  Okla.  617,  73  Pac.  268.  CaL, 
Mont.,  N.  Dak.  and  S.  Dak.  have 
similar  statutes. 

23  As  has  several  times  already 
been  pointed  out,  one  partner  has 
ordinarily  no  implied  authority  to 
sell,  assign,  mortgage  or  transfer  the 
partnership  property  in  payment  or 
security  of  his  own  private  debt. 
That  it  is  his  own  private  debt,  the 
creditor,  of  course,  can  usually  not 
fail  to  know.  If  he  knew  that  the 
property  which  was  transferred  to 
him  in  payment  or  security  really 
belonged  to  the  partnership,  and 
that  the  other  partners  had  not  au- 
thorized the  transfer,  he,  of  course, 
would  have  ordinarily  no  pretense  of 
right  to  hold  it;  but  even  if  he  did 
not  know  it,  and  took  it  in  good 
faith,  he  nevertheless  could  ordinar- 
ily not  hold  it  (money  and  negoti- 
able instruments  not  now  being  con- 


sidered), since  usually  no  one  can 
convey  a  better  title  to  chattels  than 
he  himself  has,  even  though  he  con- 
veys to  a  bona  fide  purchaser  for 
value.  The  latter,  to  be  protected, 
must  usually  be  able  to  show  fur- 
ther that  he  was  misled  into  taking 
the  property  by  relying  upon  some 
conduct  of  the  true  owner  which 
fairly  justified  him  in  believing  that 
the  transfer  was  authorized.  See 
Cannon  v.  Lindsey  (1887),  85  Ala. 
198,  3  So.  676,  7  Am.  St.  E.  38; 
Farris  v.  Morrison  (1899),  66  Ark. 
318,  50  S.  W.  693;  Janney  v. 
Springer  (1889),  78  Iowa  617,  43 
N.  W.  461,  16  Am.  St.  E.  460; 
Brickettv.  Downs  (1895),  163  Mass. 
70,  39  N.  E.  776;  Todd  v.  Lorah 
(1874),  75  Pa.  155;  Eogers  v.  Bet- 
terton  (1894),  93  Tenn.  630,  27  S. 
W.  1017;  Nichols  v.  Thomas  (1915), 
51  Okla.  212,  151  Pac.  847,  L.  E.  A. 
1916  B  908;  Warren  v.  Martin 
(1888),  24  Neb.  273,  38  N.  W.  849 
carries  the  protection  of  the  trans- 
feree very  far. 

What  the  remedy  is,  where  the 
partnership  property  is  thus  wrong- 
fully disposed  of,  is  discussed  in  a 
later  section.  See  §  331. 

24  See  Locke  v.  Lewis  (1878),  124 
Mass.  1,  26  Am.  Eep.  631;  Eeid 
v.  Hollinshead  (1825),  4  B.  &  Cress. 
867,  7  Dow.  &  By.  444;  Willey  v. 
Bank  (1904),  141  Cal.  508,  75  Pac. 
106. 


243 


§§275,276]  LAW  OP  PARTNERSHIP 

§  275.  With  respect  of  the  partnership  real  estate,  other 

rules  apply  in  many  cases.  Not  only  may  the  land  not  be  held 
for  sale,  but  the  technical  difficulties,  already  noted,25  respect- 
ing the  execution  of  deeds  by  one  partner,  may  prevent  a  com- 
pleted transfer.  If  the  partnership,  on  the  other  hand,  is  one 
organized  to  deal  in  land,  it  would  be  ordinarily  within  the 
implied  authority  of  each  partner  to  make  contracts  at  least 
for  the  sale  of  such  land,  which  equity  would  enforce  against 
the  partnership,26  even  if  he  would  not  be  deemed  authorized  to 
make  the  complete  conveyance. 

Under  the  Uniform  Partnership  Act,  where  title  to  real  prop- 
erty is  in  the  partnership  name  any  partner  may  convey  title 
to  such  property  by  a  conveyance  executed  in  the  partnership 
name,  wherever  the  conveyance  is  within  the  actual  or  ostensible 
authority  of  the  partner;  while  a  conveyance  of  it  in  his  own 
name,  under  the  same  circumstances,  passes  the  equitable  title  to 
the  land.27 

§276.  Suits  at  law. — Many  cases  arise  in  the  ordinary 

conduct  of  the  business,  as  for  example  in  the  collection  of 
debts  due  to  the  partnership  or  in  defending  actions  brought 
against  it,  in  which  the  authority  of  any  partner  to  institute, 
conduct  or  authorize  legal  actions  involving  the  partnership 
affairs  would  be  undoubted.  Without  such  an  authority  a  part- 
ner at  times  might  be  unable  either  to  enforce  his  own  rights 
or  make  his  own  defence.  "A  partner  may  sue  in  the  name 
of  himself  and  copartners  without  their  consent,"  says  Mr. 
Justice  Lindley,28  ''but  if  he  sues  against  their  consent  he  must 
indemnify  them  against  the  costs.  So  one  partner  may  defend 

25  See  ante  §§  263,  264.  In  Kuhn  v.  Weil,  supra,  the  court, 

26  See  Rovelsky  v.  Brown  (1891),  after  stating  the  general  rule  as  to 
92  Ala.  522,  9  So.  182,  25  Am.  St.  the    authority    of    each    partner    as 
R.  83,  Mechem's  Gas.  832,  Gilm.  Gas.  agent  for  the  partnership,  said  "Un- 
239.  der  this  general  authority  the  right 

27 Sec.  10  (1),  (2).    See  this  sec-  of  one  partner  in  a  mercantile  firm, 

tion  in  full  in  the  Appendix.  without  consulting  his  copartners,  to 

28  1  Lindley  on  Partnership  (Ew-  sue  in  the  name  of  all  the  copartners 

ell's   2d   Am.   ed.),   271,    (7th  ed.)  for  a  debt  due  the  firm,  either  in 

307.      See,     also     Kuhn     v.     Weil  an  ordinary  action  or  one  in  attach- 

(1880),  73  Mo.  213;   Ward  v.  Bar-  ment,  cannot  be  questioned." 
ber,  1  E.  D.  Smith  (N.  Y.),  423. 

244 


AUTHORITY    OP    PARTNERS  [§  277 

an  action  brought  against  the  firm,  indemnifying  the  firm  against 
the  consequences  of  so  doing  if  he  acts  against  the  will  of  the 
other  partners. ' '  If  the  firm  as  such  is  sued,  as  it  may  be  under 
some  statutes,29  one  partner  may  employ  an  attorney  who  may 
enter  the  appearance  of  the  firm  as  such,  though  one  partner 
has  ordinarily  no  implied  authority  to  appear  for,  or  authorize 
the  appearance  of  the  other  partners  as  individuals  so  as  to 
subject  them  to  personal  judgment  where  they  were  not  served 
with  process  and  did  not  personally  appear.30 

For  trespasses  and  other  similar  acts  committed  by  one  part- 
ner in  attempting  to  enforce  partnership  demands  by  legal 
process,  the  firm  will  ordinarily  be  liable.31  Even  for  the  ma- 
licious acts  of  one  partner,  the  others  may  be  liable  if  they 
co-operate  in  them  or  subsequently  ratify  them ;  and  while  .it 
has  been  held  that  one  partner  is  not  liable  for  a  malicious 
prosecution  carried  on  by  his  partner  if  he  did  not  know  of  it 
or  consent  to  it,  and  no  benefit  resulted  to  the  firm,32  there 
seems  to  be  no  good  reason  why  a  partner  should  not  be  liable 
for  a  malicious  prosecution  by  his  copartner  in  any  case  in 
which  any  other  principal  would  be  liable  for  the  act  of  his 
general  agent.33 

§277.  Suretyship  and  guaranty. — The  business  of  the 

partnership,  presumptively,  is  to  be  carried  on, — its  powers  ex- 

29  See   post,    §337.  32  Rosenkrans    v.    Barker    (1885), 

30 See  Phelps  v.   B^wer    (1852),  115  111.   331,   3   N.   E.   93,   56   Am. 

9   Cush.    (63    Mass.)    390,   57   Am.  Rep.  169,  Meehem's  Gas.  405.     See 

Dec.    56;    Haslet  v.   Street    (1823),  also»  accord,  Bernheimer  v.  Becker 

2  McCord  (S.  C.),  310,  13  Am.  Dec.  (1905)>  102  Md.  250,  62  Atl.   526, 

724,    and    note;    Hall    v.    Lanning  1U  Am"  St-  E'  356>  3  L'  E-  A'  <N' 

(1875),  91  U.  S.  160,  23  L.  ed.  271;       S'>  22l>  Kirk  v"  Garrett  <1896>>  84 

is  or*-  i          /io-i«^    -.T  -IT*        Md-   383>    35    Atl-    1089J    Marks   v. 

Bennett  v.  Stickney  (1845),  17  Vt.      TT     ,.          ,,ono. 

Hastings    (1892),  101  Ala.  165,  13 

5dl-  So.   297. 

Compare  Tomlinson  v.  Broadsmith          Compare  MarMey  y>  gnQW  (M04) ? 

[1896]  1  Q.  B.  386  as  to  the  author-  20?  Pa  44?j  56  AtL  9Q9j  64  L>  R  A 

ity  of  a  managing  partner.  ggg^ 

31  See  Harvey  v.  Adams   (1875),  83  See  Mcllroy  v.  Adams  (1877), 

32     Mich.     472;     Rolfe    v.    Dudley  32   Ark.    315;    Haney  Mfg.    Co.    v. 

(1885),  58  Mich.  208,  24  N.  W.  657;  Perkins   (1889),   78  Mich.   1,  43   N. 

Kuhn  v.  Weil,  supra.  W.  1073. 

245 


277] 


ercised,  its  credit  extended — for  the  benefit  of  the  partnership 
and  not  merely  for  the  benefit  or  accommodation  of  third  per- 
sons or  of  a  single  partner.  One  partner  therefore  may  bind 
the  firm  upon  a  contract  of  suretyship,  indemnity  or  guaranty 
for  the  partnership  purposes  and  within  the  scope  of  its  busi- 
ness ; 34  but  he  has  no  implied  authority  to  bind  the  firm  by 
contracts  of  guaranty,  indemnity  or  suretyship  either  for  him- 
self individually  or  for  strangers  to  the  firm.38  The  mere  fact 
that  the  firm  would  derive  an  incidental  or  collateral  benefit  from 
the  act,  is  not  enough  to  change  the  rule ; 36  though  there  un- 
doubtedly may  be  cases  in  which  the  benefit  would  be  so  sub- 
stantial, direct  and  immediate  as  to  justify  treating  it  as  a 


34  Thus  a  partner  in  a  firm  of  live 
stock  dealers  may  agree  that  the 
firm  will  protect  a  bank  which  dis- 
counts their  buying  agent's  drafts 
to  pay  for  cattle  purchased.  First 
National  Bank  v.  Rowley  (1894),  92 
Iowa  530,  61  N.  W.  195;  a  partner 
in  a  firm  of  cattle  dealers  which  has 
a  large  quantity  of  cattle  which  it 
is  anxious  to  dispose  of  in  some  way, 
may  bind  his  firm  by  agreeing  that 
if  a  farmer  will  take  them  the  firm 
will  either  buy  them  back  later  or 
guarantee  him  a  profit,  Jordan  v. 
Miller  (1881),  75  Va.  442;  a  part- 
ner in  a  mercantile  firm  may  bind 
his  firm  by  agreeing  to  indemnify  a 
third  person  who  accepts  for  the  ac- 
commodation of  the  firm  drafts  by 
the  firm  upon  such  person,  Wilkins 
v.  Pearce  (1848),  5  Denio  (N.  Y.) 
541;  a  partner  in  a  commercial  firm 
may  bind  the  firm  by  guaranteeing 
paper  held  by  the  firm  upon  a  sale 
or  discount  thereof  for  firm  pur- 
poses, McNeal  v.  Gossard  (1897),  6 
Okla.  363,  50  Pac.  159;  a  partner  is 
a  firm  of  bond  and  security  dealers 
may  bind  the  firm  by  guaranteeing 
payment  by  the  maker  of  bonds  sold 
by  the  firm:  First  Nat.  Bank  v. 


Farson  (1919),  226  N.  Y.  218,  123 
N.  E.  490. 

35  See  Clarke  v.  Wallace   (1891), 
1  N.  D.  404,  48  N.  W.  339,  26  Am. 
St.   Eep.   636,   Mechem's  Cas.  368; 
Andrews  v.  Planters'  Bank  (1846), 
7  Smedes  &  Mar.    (Miss.)    192,  45 
Am.  Dec.  300;   Persons  v.  Oldfield 
(1912),  101  Miss.  110,  57  So.  417; 
New  York,  etc.,  Ins.  Co.  v.  Bennett 
(1825),  5  Conn.  574,  13  Am.  Dec. 
109,    and    note;     Avery    v.    RowelL 
(1883),  59  Wis.  82,  17  N.  W.  875; 
Seeberger    v.    Wyman    (1899),    108 
Iowa  527,  79  N.  W.  290   (one  of  a 
firm  of  lawyers  undertaking  to  in- 
demnify a  surety  upon  a  bond  given 
in    a   suit) ;    Osborne   v.    Thompson 
(1886),   35    Minn.    229,    28   N.    W. 
260;  First  National  Bank  v.  Carpen- 
ter (1875),  41  Iowa  518. 

Long  acquiescence  may  preclude 
raising  the  objection,  Bank  of  Mo- 
nongahela  v.  Weston  (1899),  159  N. 
Y.  201,  54  N.  E.  40,  45  L.  E.  A.  547. 

36  See    Clarke   v.    Wallace,   supra, 
(where  in  order  to  secure  a  firm  debt 
of  $1,300   the  partner  endorsed,  in 
the  firm  name,  the  debtor's  note  for 
$5,000);    Moore  v.  Stevens   (1883), 
60  Miss.  809. 


246 


AUTHORITY   OP    PARTNERS  [§  278 

partnership  act.  Beyond  that,  there  must  be  actual  authority, 
a  course  of  dealing,  or  subsequent  ratification,  to  hold  the  other 
partners  liable. 

Where,  the  indorsement  of  the  firm  name  appears  as  such 
upon  what  is  clearly  the  individual  note  of  the  partner,  it  is 
warning  of  itself  that  the  firm  name  was  used  for  his  accommo- 
dation, and  the  firm  cannot  be  held  unless  it  authorized  it ; 87 
but  where  the  instrument  does  not  fairly  disclose  that  it  is  the 
individual  obligation  of  one  partner,  as  where  the  note  of  the 
partner  is  made  to  the  firm  and  indorsed  in  its  name  by  that 
partner,  though  for  his  own  benefit,  a  holder  for  value  igno- 
rant of  the  fraud  may  recover.38 

§278.  Of  the  authority  of  a  managing  partner. — It  is  en- 
tirely competent,  and  not  at  all  uncommon,  especially  where  the 
number  of  partners  is  large  or  other  reasons  of  convenience  or 
interest  suggest  it,  for  all  of  the  partners  to  agree  that  one  of 
them  only  shall  undertake  or  be  charged  with  the  management 
and  conduct  of  the  business  to-  the  relief  or  exclusion  of  the 
others.  (They  might  equally  appoint  a  non-partner  as  a  gen- 
eral managing  agent,  and  with  much  the  same  purpose  and 
result. )  This  agreement  may  be  and  often  is  express  and  formal, 
being  frequently  a  term  in  the  partnership  articles;39  it  may 

37  See   Tanner  v.  Hall   (1845),  1  48  Pa.  514,  88  Am.  Dec.  475;  Kollins 
Pa.  St.  417;  Brown  v.  Pettit  (1896),  v.  Stevens  (1850),  31  Me.  454,  Oilm. 
178  Pa.  17,  35  Atl.  865;   Smith  v.  Gas.  370.     Compare  Eeed  v.  Bacon 
Weston   (1899),  159  N.  Y.  194,  54  (1900),  175  Mass.  407,  56  N.  E.  716. 
N.  B.  38,  34  L.  E.  A.  723,  56  Am.  39  As,  e.  g.,  in  Kennedy  v.  Porter 
St.  E.  742.  (1888),   109  N.   Y.   526,   17   N.   E. 

One  who  sees  that  he  is  getting  a  426;    Patterson  v.   Lily    (1884),  90 

firm  acceptance  as  an  accommoda-  N.     Car.     82;     Brooks     v.     Martin 

tion  to  a  third  person,  must  be  able  (1863),  69  U.  S.    (2  Wall.)   70,  17 

to  prove  that  all  the  partners  assent  L.     ed.     732;     Kimbefly    v.     Arms 

to  it,     Bloom  v.  Helm   (1876),   53  (18S8),  129  U.  S.  512,  9  Sup.  Ct. 

Miss.  21.  355,    32    L.    ed.    764;    Callahan    v. 

38  See  Eedlon  v.  Churchill  (1882),  Heinz  (1898),  20  Ind.  App.  359,  49 
73  Me.  146,  40  Am.  Eep.  345;  Sher-  N.  E.  1073;  Winship  v.  Bank  of  U. 
wood  v.  Snow  (1877),  46  Iowa  481,  S.    (1831),  30  U.   S.   (5  Pet.)    529, 
26  Am.  Eep.  155;  Atlas  Nat.  Bank  8    L.    ed.    216;     Tate    v.    Clements 
v.    Savery    (1879),    127    Mass.    75;  (1878),   16  Fla.  339,  2G   Am.  Eep. 
Miller  v.  Consolidated  Bank  (1865),  709;    Baxter  v.   Eollins    (1894),   90 

247 


§279] 


LAW   OF   PARTNERSHIP 


also  be  informal  and  tacit,  as  where  the  others  permit  or  en- 
courage one  partner  more  and  more  to  assume  the  management 
to  the  degree  of  becoming  in  fact  the  managing  partner.40 
"Where  the  arrangement  is  express  and  third  persons  have  notice 
of  it,  the  authority  of  such  a  manager  may  be  as  general  or  as 
restricted  as  the  parties  see  fit  to  make  it ;  but  secret  limitations, 
while  operative  between  the  partners,  can  not  affect  the  right 
of  third  persons  to  rely  upon  the  ostensible  arrangements  and 
the  usages  in  similar  cases.41 

§279.  A  general  managing  partner  becomes,  therefore, 

practically  the  possessor  and  exerciser  of  all  the  powers  which 
any  partner  might  otherwise  have  properly  exercised  in  the 
conduct  of  the  business.42  His  authority  is  coextensive  with, 
but  limited  by,  the  nature  and  character  of  the  business.  If  it 
is  a  non-trading  partnership,  that  fact  affects  the  range  of  the 
managing  partner's  authority.  In  such  a  partnership,  he  would 
therefore  have  ordinarily  no  implied  authority  to  borrow 
money43  or  bind  the  partnership  by  negotiable  instruments.44 


Iowa  217,  57  N.  W.  838,  48  Am.  St. 
B.  432;  by  mutual  consent:  Fordyce 
v.  Shriver  (1886),  115  111.  530,  5  N. 
E.  87. 

40  As,  e.  g.,  in  Salt  Lake  Brewing 
Co.  v.  Hawke  (1901),  24  Utah  199, 
66    Pac.     1058;     Fulmer's    Appeal 
(1879),  90  Pa.  143. 

41  See  Winship  v.  Bank  of  U.  S., 
supra;  Tate  v.  Clements,  supra. 

42  See       Anderson       v.       Clayton 
(1911),  39  Utah   343,  117  Pac.  41 
(contract   by   managing   partner   in 
real  estate  business  to  sell  partner- 
ship land) ;   Salt  Lake  Brewing  Co. 
v.  Hawke,  supra,  (borrowing  money 
by  partner  in  trading  firm) ;  Morse 
v.    Richmond    (1881),    97    111.    303, 
(giving  note  for  money  to  pay  for 
land  bought  in  land-dealing  firm) ; 
Waltham     Piano     Co.     v.     Pierson 
(1920),  —  Neb.  — ,  176  N.  W.  364 
(purchasing  goods). 


43  Managing  partner  in  a  trading 
partnership  may  borrow   money   on 
the  credit  of  the  partnership:  Lindh 
v.    Crowley     (1883),    29    Kan.    756 
(drug    store) ;    Salt    Lake    Brewing 
Co.   v.   Hawke,  supra,    (saloon-keep- 
ers); but  not  in  a  non-trading  one: 
Davis     v.     Eichardson     (1871),     45 
Miss.  499,  7  Am.  Eep.  732;  Prince 
v.    Crawford    (1874),   50   Miss.    344 
(planting  or  farming). 

44  Managing    partner    in    trading 
firm   may   bind   the   partnership   by 
promissory   note:    First   Nat.    Bank 
v.  Grignon  (1901),  7  Idaho  646,  65 
Pac.  365;  Citizens  Commercial  Bank 
v.  Platt   (1903),  135  Mich.  267,  97 
N.  W.  694  (renewing  notes),  but  not 
in  a  non-trading  one:  Davis  v.  Eich- 
ardson, supra;  Prince  v.  Crawford, 
supra. 


248 


AUTHORITY    OP    PARTNERS  [§  280 

He  may  collect  and  pay  debts,  make  and  perform  all  proper 
partnership  contracts,  and  the  like ;  but  he  would  have  no  more 
authority  than  any  other  partner  to  apply  partnership  property 
or  credits  to  his  own  uses,  and  his  authority  to  assign  all  the 
property  for  the  benefit  of  creditors  would  be  limited  like  that 
of  any  other  partner.46  Express  or  tacit  consent,  or  subsequent 
ratification^  may,  of  course,  extend  the  range  of  the  managing 
partner's  authority,46  even  beyond  the  scope  originally  fixed  for 
the  partnership. 

§  280.  Same  subject — Several  managers — Directors. — Instead 
of  confiding  the  management  of  the  partnership  affairs  to  a 
single  partner,  as  discussed  in  the  preceding  section,  it  may  be 
confided  to  two  or  more.  In  the  case  of  large  partnerships, 
especially  those,  like  joint  stock  companies,  with  transferable 
shares,  the  articles  frequently  provide  for  management  by  a 
board  of  managers  or  directors  elected  by  the  other  partners, 
very  much  as  in  the  case  of  a  corporation. 

These  boards  of  directors  or  managers  are  also  not  infre- 
quently provided  with  regular  officers,  such  as  president,  sec- 
retary, and  the  like.  They  then  assume  much  more  closely  the 
external  appearance  of  corporations;  but  there  is  nothing  in 
these  provisions  inconsistent  with  the  law  of  partnership,  and 
in  some  States  such  partnerships  are  not  uncommon.47  The 
form  of  organization  of  these  partnerships  is  ordinarily  not  such 

45  May  assign,  if,  and  only  if,  it  is  47  See  People  v.  Coleman  (1892), 
necessary    and    other    partners    are  133  N.  Y.  279,  31  N.  E.  96,  16  L.  E. 
absent  where  they  can  not  be  con-  A.  183;   Willis  v.  Chapman  (1896), 
suited:  Williams  v.  Gillespie  (1888),  68    Vt.    459,    35    Atl.    459;    Great 
30  W.  Va,  586,  5  S.  E.  210;  Claflin  Southern  Hotel  Co.  v.  Jones  (1899), 
v.  Evans  (1896),  55  Ohio  183,  45  N.  177  U.  S.  449,  20  Sup.  Ct.  690,  44  L. 
E.  3,  60  Am.  St.  E.  686;  Callahan  v.  ed.  482;  Warner  v.  Beers  (1840),  23 
Heinz  (1898),  20  Ind.  App.  359,  49  Wend.    (N.  Y.)    103;    Spotswood  v. 
N.    E.    1073;     Forbes    v.    Scannell  Morris    (1906),    12    Idaho    360,    85 
(1859),  13  Cal.  242.  Pac.  1094,  6  L.  E.  A.   (N.  S.)   665; 

46  As  to  ratification  of  unauthor-  Pettis  v.  Atkins  (1871),  60  111.  454; 
ized  act  by  taking  benefits,  see  John-  Moore  v.  May  (1903),  117  Wis.  192, 
ston  v.  Bernheim  (1882),  86  N.  Car.  94  N.  W.  45. 

339. 

249 


§§  281,  282]  LAW  OP  PARTNERSHIP 

as  to  mislead  persons  dealing  with  them  into  the  belief  that  the 
individual  shareholders  are  authorized  to  act  as  agents  for  all. 

§  281.  Of  the  powers  of  a  majority. — The  extent  to  which  a 
majority  of  the  partners  may  control  the  partnership  affairs  is 
perhaps  not  entirely  settled  by  the  authorities.  It  is  clear,  how- 
ever, that  no  majority  however  large  can,  against  the  dissent  of 
the  minority,  change  the  essential  nature  or  extent  of  the  partner- 
ship business  as  originally  agreed  upon,  as,  for  example,  to  alter 
or  amend  the  articles,  reduce  or  increase  the  capital,  embark 
upon  a  new  business,  change  its  agreed  location,  alter  the  share 
of  a  partner,  admit  a  new  member,  and  the  like.  If  they  attempt 
to  do  so,  the  dissenting  partners  will  not  be  bound.48  Neither 
can  any  majority  deprive  the  minority  of  any  rights  given  by 
the  partnership  agreement,  or  inherent  in  the  nature  of  the 
partnership. 

§282.  But  as  to  matters  pertaining  merely  to  the 

manner  of  conducting  the  business,  and  all  questions  concern- 
ing what  are  sometimes  called  the  internal  affairs  of  the  part- 
nership, it  is  equally  clear  that,  if  the  articles  do  not  determine 
them,  the  partners  themselves  must  decide,  and  here  in  accord- 
ance with  a  well  settled  principle  applicable  to  such  cases  to 
which,  by  implication,  all  have  agreed,  the  majority  will  pre- 
vail. While  one  of  two  partners  cannot,  therefore,  prevail 
against  the  expressed  dissent  of  his  partner,  inasmuch  as  each 
has  an  equal  voice,49  it  is  held  that  a  majority,  where  there  are 
more  than  two,  can  prevail  as  to  these  incidental  matters,  even 
against  the  dissent  of  the  minority,  if  they  act  fairly  and  in 
good  faith.60  A  majority,  however,  will  not,  simply  because  it 

48  See  Natusch  v.  Irving   (1824),  fairly  and  in  pursuance  of  the  con- 

2   Coop.    temp.    Cot.   358;    Const  v.  tract.     Blisset  v.  Daniel  (1853),  10 

Harris  (1824),  Turn.  &  R.  517;  Ab-  Hare  493,  19  Eng.  Bui.  Gas.  517. 

bott  v.  Johnson  (1855),  32  N.  H.  9;  49  See  ante,  §  242. 

Zabriskie  v.  Railroad  Co.  (1867),  18  60  See  Johnston  v.  Button  (1855), 

N.  J.  Eq.  178,  90  Am.  Dec.  617.  27    Ala,    245,    Mechem  >s    Gas.    371, 

Majority  cannot  expel  a  member  Gilm.    Gas.    391;    Cotton    Plant   Oil 

unless  by  virtue  of  some  provision  in  Co.  v.  Buckeye  Oil  Co.    (1909),  92 

the  articles,  and  then  only  if  it  acts  Ark.  271,  122  S.  W.  658;  Staples  v. 

250 


[§283 


is  a  majority,  be  permitted  to  oppress  the  minority  or  despoil 
them  of  their  rights.51 

The  Uniform  Partnership  Act  provides  that  "any  difference 
arising  as  to  ordinary  matters  connected  with  the  partnership 
business  may  be  decided  by  a  majority  of  the  partners;  but  no 
act  in  contravention  of  any  agreement  between  the  partners  may 
be  done  rightfully  without  the  consent  of  all  the  partners."62 

Serious  violation  of  the  rule  may  doubtless  be  prevented  by 
injunction,63  and  pertinacious  disregard  of  it,  at  least,  would 
doubtless  be  good  ground  for  a  dissolution.54 

§283.  Ratification  of  unauthorized  acts. — The  acts  of  one 
partner  which  may  bind  the  partnership  may  be  not  only  those 
which  have  been  previously  and  expressly  authorized,  or  which 
are  implied  from  the  existence  of  the  relation,  and  the  like,  but 
may  also  be  those  which,  though  unauthorized  when  done,  have 
subsequently  been  ratified  by  the  other  partners,  either  expressly 
or  by  implication.  Liability  may  thus  be  imposed  either  in  con- 
tract or  in  tort.55  The  occasions  and  conditions  of  ratification 


Sprague   (1883),  75  Me.  458;  Pea-         52  Sec.  18(h). 


cocks  v.  Cummings  (1863),  46  Pa. 
434,  Burd.  Gas.  353;  Clarke  v.  Bail- 
road  Co.  (1890),  136  Pa.  St.  408,  20 
Atl.  562,  10  L.  E.  A.  238;  Markle  v. 
Wilbur  (1901),  200  Pa.  457,  50  Atl. 
204;  Beirden  v.  Stephenson  (1913), 
87  Vt.  430,  89  Atl.  465,  Ann.  Gas. 
1916  C  109;  Eeiser  v.  Johnston 
(1917),  —  Okla.  — ,  166  Pac.  723, 
L.  E.  A.  1918  A  924. 

51  See  Chicago  Hansom  Cab  Co.  v. 
Yerkes  (1892),  141  111.  320,  30  N. 
E.  667,  33  Am.  St.  E.  315;  Farmers' 
L.  &  T.  Co.  v.  New  York,  etc.,  E.  Co. 
(1896),  150  N.  Y.  410,  44  N.  E. 
1043,  55  Am.  St.  E,  689,  34  L.  R.  A. 
76  (corporation  cases,  but  the  prin- 
ciple is  the  same).  As  to  the  proper 
attitude  of  the  majority,  see  Wall  v. 
London  Assexs  Corp.  [1898],  2  Ch. 
469. 


53  See  ante,  §  226. 

64  See  post,  §  377. 

55  See  Porter  v.  Curry  (1869),  50 
111.  319,  99  A.  Dec.  520,  Mechem's 
Cas.  343;  Maclean  v.  Dunn  (1828), 
4  Bing.  722;  Holbrook  v.  Chamber- 
lin  (1874),  116  Mass.  155,  17  Am. 
Eep.  146;  Davis  v.  Bichardson 
(1871),  45  Miss.  499,  7  Am.  Eep. 
732;  Enterprise  Oil  &  Gas.  Co.  v. 
Transit  Co.  (1896),  172  Pa.  421,  33 
Atl.  687,  51  Am.  St.  E.  746;  Eock 
v.  Collins  (1898),  99  Wis.  630,  75 
N.  W.  426,  67  Am.  St.  B.  885; 
Clark  v.  Hyman  (1880),  55  Iowa  14, 
7  N.  W.  386,  39  Am.  Eep.  160;  Mc- 
Gahan  v.  Eondout  Bank  (1894),  156 
IT.  S.  218,  15  Sup.  Ct.  347,  39  L.  ed. 
403;  Hull  v.  Young  (1888),  30  S. 
Car.  121,  8  S.  E.  695,  3  L.  E.  A.  521 
(ratification  of  execution  of  note 


251 


283] 


LAW   OP  PARTNERSHIP 


in  these  cases  are  the  same  as  in  any  other  case  of  agency — 
the  firm  or  the  other  partners  being  principal,  and  the  partner 
atcting  being  agent, — and  as  the  reader  is  assumed  to  be  famil- 
iar with  this  subject  from  his  previous  study  of  agency,  no 
extended  discussion  of  it  will  be  attempted  here.56 

It  is  worth  while,  however,  to  recall  that  in  order  that  there 
may  be  ratification  the  act  in  question  must  have  been  done  by 
the  partner  as  agent  for  the  partnership ;  that  the  partners  al- 
leged to  have  ratified  must  have  had  full  knowledge  of  all  of 
the  material  facts  concerning  the  act  to  be  ratified;  and  that 
where  ratification  is  sought  to  be  predicated  upon  the  receipt  or 
acceptance  of  the  alleged  benefits  of  the  act,  such  acceptance 
must  have  taken  place  under  circumstances  fairly  manifesting 
a  consenting  and  approving  mind.  The  mere  fact  that  benefits 
may  have  resulted  to  the  partnership  is  not,  occasional  state- 
ments to  the  contrary  notwithstanding,  of  itself  enough  to  estab- 
lish ratification,57  however  much  it  might  at  times  justify  a  re- 
covery in  quasi  contract. 

As  in  other  cases,  a  subsequent  ratification  could  not  cut  off 
intervening  rights.58 


under  seal);  Hurt  v.  Clarke  (1876), 
56  Ala.  19,  28  Am.  Kep.  751;  Levi 
v.  Latham  (1884:),  15  Neb.  509,  19 
N.  W.  460,  48  Am.  Rep.  361 ;  Fillans 
v.  Greenfield  (1917),  39  S.  Dak.  226, 
164  N.  W.  63. 

56  See     1     Mechem     on     Agency, 
§§  376  et  seq. 


57  See  Dawson  v.  Elrod  (1899), 
105  Ky.  624,  49  S.  W.  465,  20  Ky. 
Law  E,  1436,  88  Am.  St.  B.  320, 
Mechem 's  Gas.  380. 

68  See  Coleman  v.. Darling  (1886), 
66  Wis.  155,  28  N.  W.  367,  57  Am. 
Eep.  253. 


252 


CHAPTER  XI. 


WHO  ABE  BOUND  BY  THE  ACTS  OF  A  PARTNEE. 


§  284.  In  general. 

I.  IN  CONTRACT. 

285,286.  All    partners    bound    by 
authorized  contracts. 

287.  Dormant,  secret  and  nominal 

partners  bound  also. 

288.  Liability    of    the    firm    upon 

contracts  made  by  one  part- 
ner in  his  own  name. 
289,290.  Known          partner- 
ship— Simple    contracts    in 
name  of  one  partner. 

291.  Note  of  one  partner. 

292.  Unknown  partnership. 

'293.  Contracts  under  seal. 

294.  Judgment     against     one 

partner. 

295.  Contracts  made  in  individual 

names  of  all  the  partners. 

296.  Contracts     where     firm     does 

business    in    name    of    one 
partner. 


i  297.  Particular  contract  made  by 
firm  in  name  of  one  part- 
ner. 

298.  Contracts     where    there    are 

two    firms    of    same    name 
with  common  partner. 

299.  Contracts    where    same    per- 

sons    constitute      different 
firms  with  different  names. 

300.  Liability  of  partner  who  ex- 

ceeds his  authority. 

II.  IN  TORT. 

301.  Firm  liable  for  torts  of  one 

partner  committed  in  course 
of  business. 

302.  Liability  of  firm  for  partner's 

malicious  or  criminal  act. 

303.  Uniform  Partnership  Act. 
304,305.  Liability     of     firm     for 

partner's  breach  of  trust. 


§  284.  In  general. — The  question,  who  are  bound  by  the  acts 
of  a  partner,  presents  several  different  aspects.  It  is  the  ques- 
tion of  the  rights  and  remedies  of  third  persons  based  upon  the 
act  of  one  or  more  partners.  It  may  arise  under  varying  cir- 
cumstances, as,  for  example,  where  one  partner  has  assumed  to 
bind  the  firm,  but  it  is  claimed  that  his  act  was  unauthorized; 
where  he  apparently  acts  for  himself  alone,  but  it  is  claimed 
that  the  firm  was  the  real  party;  where  certain  persons  were 
ostensibly  the  only  partners,  but  it  is  claimed  that  others  were 
also  actually  in  the  firm ;  where  the  act  was  the  making  of  a  con- 
tract ;  where  it  was  the  commission  of  a  tort,  and  the  like.  The 

253 


§§  285,  286]  LAW  OF  PARTNERSHIP 

most  appropriate  classification  of  the  subject  for  our  purpose  is 
probably  that  used  in  Agency,  namely,  the  liability — 1.  In  con- 
tract. 2.  In  tort. 

I.   IN  CONTRACT. 

§285.  All  partners  bound  by  authorized  contracts. — It  has 

been  seen  in  an  earlier  chapter  that  each  partner  is  ordinarily  the 
agent  of  the  partnership  with  authority  conferred,  either  express- 
ly or  impliedly,  to  bind  the  partners  as  their  agent.  It  follows, 
therefore,  that  whenever  a  partner  makes  a  contract  for  the 
partnership  and  in  the  partnership  name,  within  the  limit  of 
his  express  or  implied  authority  as  a  partner,  he  binds  all  the 
members  of  the  partnership  upon  it.  It  is  immaterial,  in  this 
connection,  whether  the  other  partners  knew  of  the  act  or  not; 
or,  in  the  case  of  implied  powers,  whether  they  had  previously 
consciously  consented  to  it  or  not ;  or,  if  it  was  within  the  scope 
of  the  business,  whether  it  was,  or  was  not,  a  violation  of  their 
private  agreement  between  themselves.  The  only  question,  so 
far  as  the  liability  of  the  partners  to  a  third  person,  ignorant 
of  their  private  agreements,  is  concerned,  is  whether  the  con- 
tract was,  in  contemplation  of  law,  within  the  authority  of  the 
partner;  if  it  was,  then  every  partner  is  bound  by  it.1 

§  286.  But  while  each  partner  is  thus  bound  to  answer, 

and  out  of  his  individual  estate  if  necessary,  for  the  non-per- 
formance of  the  partnership  contracts,  it  does  not  follow  that, 
in  becoming  a  party  to  a  partnership  contract,  he,  at  the  same 
time,  enters  into  a  separate  individual  contract  in  identical 
terms.  A  partnership  contract  to  employ  a  particular  person 
does  not  result  in  a  separate  contract  by  each  partner  indi- 
vidually to  employ  that  person ;  and  a  contract  by  which  a  part- 
nership, upon  a  sale  of  its  business,  agrees  not  to  resume  busi- 
ness within  a  certain  period,  has  been  held  not  to  bind  an  indi- 
vidual partner  to  refrain  from  doing  so,2  though  it  would  be 

ISee  Sweet  v.  Wood    (1893),  18  2  See      Streichen      v.      Fehleisen 

E.    I.   386,   28   Atl.   335,    Mechem's  (1900),  112  Iowa  612,  84  N.  W.  715, 

Cas.  332;   Farmers'  Ins.  Co.  v.  Ma-  51  L.  E.  A.  412.     A  similar  holding 

lone  (1895),  45  Neb.  302,  63  N.  W.  has    been    made    in     corporations: 

802.  Hall's    Safe    Co.    v.    Herring-Hall- 

254 


WHO  BOUND  BY  ACTS  OF  PARTNER  [§  287 

otherwise  if  the  contract  in  terms  covered  both  the  partnership 
and  the  several  members  thereof.3  It  is  for  the  partnership 
obligation  only  that  each  partner  usually  assumes  liability. 

§  287.  Dormant,  secret  and  nominal  partners  bound  also. — 

This  liability  involves  every  one  who  was,  at  the  time  of  the 
contract,  either  actually  or  nominally  a  partner  in  the  firm.  A 
nominal  partner  is,  of  course,  liable  to  those  who  relied  upon 
him,  having  been  held  out  as  a  partner ;  *  and  if  one  were  then 
actually  a  partner  he  is  likewise  liable  though  the  other  party 
did  not  then  know  of  it,  or  though  such  partner  has  since  re- 
tired from  the  firm.  A  secret  or  dormant  partner  is  therefore 
liable,  when  discovered,  upon  partnership  contracts,  to  the  same 
extent  as  though  he  had  been  an  ostensible  partner.  The  fact 
that  the  other  party  dealt  with  the  ostensible  partner  or  part- 
ners, and  gave  credit  to  them  in  ignorance  of  the  existence  of 
the  secret  or  dormant  partner,  is  not  an  election  to  hold  the 
ostensible  partners  only,  when  the  dormant  or  secret  partners 
are  afterwards  discovered.  And  the  dormant  or  secret  partners 
are  bound  not  only  by  those  acts  which  were  actually  author- 
ized, but  also,  like  other  partners,  by  those  acts  which  were  ap- 
parently authorized,  or  were  within  the  scope  of  the  business  as 
actually  carried  on.5 

Marvin  Safe  Co.  (1906),  76  C.  C.  A.  (Va.)    248,  56  Am.  Dee.   142,  and 

495,  146  Fed.  37,  14  L.  E.  A.  (N.  S.)  note,  Gilm.  Gas.  318;  Bichardson  v. 

1182.  Farmer  (1865),  36  Mo.  35,  88  Am. 

3  See  Pittsburg  V.  F.  &  C.  Co.  v.  Dec.  129,  Gilm.  Gas.  322;   Gavin  v. 
Klingelhofer    (1904),  210  Pa.   513,  Walker  (1885),  82  Tenn.   (14  Lea) 
60   Atl.    161,   where   the   agreement  643;  Callender  v.  Eobinson  (1880), 
•was  "The  said  parties  further  agree  96  Pa.  454;  Mohawk  Nat.  Bank  v. 
that   they   will   not,   nor   shall    any  Van  Slyck  (1883),  29  Hun  (N.  Y.) 
member   of  said  parties   concerned,  188,  Burd.  Cas.   396;   Grosvenor  v. 
engage  in  a  similar  business  to  that  Lloyd   (1840),  1  Mete.   (Mass.)   19, 
now  carried  on  by  said  parties,"  etc.  Gilm.  Cas.  348;  Elmira  Iron  Boiling 

4  As  to  the  liability  of  the  nomi-  Mill  Co.  v.  Harris  (1891),  124  N.  Y. 
nal  partner,  or  liability  by  estoppel,  280,  26  N.  E.   541,  Mechem's  Cas. 
see  ante,  §  99  et  seq.  987,  Burd.  Cas.  398,  Gilm.  Cas.  349 ; 

6  See    Winship    v.    United    States  Pitkin  v.   Benfer    (1892),  50   Kan. 

Bank  (1831),  5  Peters  (U.  S.)  529,  108,  31  Pac.  695,  34  Am.  St.  E.  110, 

8  L.  ed.  216,  Gilm.  Cas.  356 ;  Brooke  Mechem  's    Cas.     383 ;     Bromley    v. 

v.    Washington     (1852),    8     Gratt.  Elliott  (1859),  38  N.  H.  287,  75  Am. 

255 


§  288]  LAW   OF   PARTNERSHIP 

Dormant  and  secret  partners  will  also  be  bound  by  the  acts 
of  the  ostensible  partners,  even  in  those  cases  wherein  the  con- 
sent of  all  partners  is  necessary,  if  the  other  party  was  ignorant 
of  their  existence  and  acted  in  good  faith.  Interests  in  and 
claims  upon  the  common  property,  fairly  acquired  in  good  faith 
upon  the  basis  that  it  was  the  sole  property  of  the  ostensible 
partner  or  partners,  will  ordinarily  be  effective  'against  the  dor- 
mant partners  also,  sinc.e  they  have  caused  or  permitted  it  to 
so  appear.6 

§  288.  Liability  of  the  firm  upon  contracts  made  by  one  part- 
ner in  his  own  name. — As  has  been  seen,  when  a  firm  name 
has  been  adopted,  it  ought  always  to  be  used  in  partnership 
transactions;  but,  through  inadvertence  or  error,  contracts  may 
be  made  in  the  individual  name  of  one  partner  which  were  de- 
signed by  one  or  both  parties  to  be  the  contracts  of  the  firm. 
The  question,  therefore,  arises,  when  may  a  contract  in  the 
name  of  one  partner  be  shown  to  be  the  contract  of  the  firm? 
The  solution  of  this  question  is  affected  both  by  the  nature  of 
the  transaction  and  by  the  intention  o^  the  parties.  Thus : 

1.  The  contract  may  be,  (a)  a  simple  contract  not  negotiable, 
(&)  a  negotiable  instrument,  or  (c)  a  contract  under  seal. 

2.  The  existence  of  the  partnership  may,  at  the  time  of  mak- 
ing the  contract,  have  been  (a)  known,  or  (b)  unknown  by  the 
other  party. 

3.  The  parties,  or  one  of  them,  may  have  intended  to  bind 

Dec.  182;  Swan  v.  Steele  (1806),  7  v.  Hollinshead  (1825),  4  B.  &  Cress. 
East  210,  Ames'  Cas.  500;  Robinson  867,  7  Dow.  &  Ry.  444,  Ames'  Gas. 
v.  Wilkinson  (1817),  3  Price  538,  29  (pledge  by  the  ostensible  part- 
Burd.  Cas.  396;  Bisel  v.  Hobbs  ner) ;  Willey  v.  Bank  (1904),  141 
(1843),  6  Blackf.  (Ind.)  479,  Oilm.  Cal.  508,  75  Pac.  106  (set-off  of 
Cas.  321.  Not  so,  where  the  dor-  firm  claim  against  claim  of  ostensi- 
mant  partner  had  withdrawn  and  ble  partner) ;  Callender  v.  Robinson 
the  partnership  had  been  dissolved  (1880),  96  Pa.  454  (execution  levy 
before  the  contract  in  question  was  by  creditor  who  relied  in  giving  the 
made.  Pitkin  v.  Benfer,  supra.  credit  on  apparent  ownership  of 
6  See  Locke  v.  Lewis  (1878),  124  ostensible  partner).  See,  also,  War- 
Mass.  1,  26  Am.  Rep.  631,  Ames'  ren  v.  Martin  (1888),  24  Neb.  273, 
Cas.  584  (sale  by  ostensible  partner  38  N,  W.  849. 
in  payment  of  his  own  debt) ;  Reid 

256 


BOUND   BY    ACTS   OF   I>AUTNKi:          [_)•  $  289,  2i)() 

(a)  the  individual  partner,  or  (b)  the  firm.     The  two  latter 
groups  are  subsidiary,  and  may  be  considered  under  the  first. 

§289.  Same  subject — Known  partnership — Simple  contracts 
in  name  of  one  partner. — Where  a  person  is  known  to  be  acting 
as  partner  for  a  known  partnership,  the  presumption  is  that 
he  intended  to  bind  the  partnership  and  not  himself  only,  and 
where  such  was  the  intention  the  partners  and  not  the  single 
partner  will  be  bound.  This  presumption,  however,  may  be  re- 
butted, and  if  it  appears  that  the  other  party  has  knowingly 
dealt  with  the  partner  as  an.  individual,  and  that  the  latter  has 
pledged  his  individual  credit,  the  partner  alone  will  be  bound 
and  not  the  firm.  And  if  the  transaction  were  really  an  indi- 
vidual one,  the  firm  does  not  become  liable  because  it  afterwards 
received  the  benefit  of  the  transaction.  Thus,  if  money  were 
loaned  or  goods  sold  to  one  partner  as  an  individual,  the  firm 
does  not  become  liable  to  the  lender  or  the  seller  simply  because 
the  money  or  the  goods  came  to  the  use  of  the  firm.  The  liability 
of  the  firm  is  to  the  partner  upon  whose  credit  the  money  or 
goods  were  obtained,  and  that  partner  must  answer  to  those 
from  whom  they  were  obtained.  Whether  the  credit  was  ex- 
tended to  the  partnership  as  such,  or  to  the  partner  individually, 
is  a  question  to  be  determined  in  view  of  all  of  the  facts  and 
circumstances  of  the  case.7 

§  290.  Where  the  contract  was  originally  made  with  one 

partner  only,  there  might  later  be  an  express  or  implied  nova- 

1  See      Tyler      v.      Waddingham  peal    (1863),   45   Pa.    181,    84   Am. 

(1890),  58  Conn.  375,  20  Atl.  335,  Dee.   487.      The   firm   is   not   liable 

8  L.  R.  A.  657;  Peterson  v.  Roach  upon  a  note  given  by  one  partner  for 

(1877),   32    Ohio   St.    374,    30   Am.  his  share  of  the  capital.     National 

Rep.  607,  Gilm.  Gas.  314;  Adams  v.  Bank  v.  Cringan,  supra.     Same  ef- 

Hardware  Co.    (1887),  78  Ga.  485,  feet:  Bannister  v.  Miller  (1895),  54 

3  S.  E.  430;   Thornton  v.  Lambeth  N.  J.  Eq.  121,  701,  32  Atl.  1066,  37 

(1889),  103  N.  C.  86,  9  S.  E.  432;  Atl.  1117;  McLinden  v.  Wentworth 

National  Bank  v.   Cringan    (1895),  (1881),  51  Wis.  170,  8  N.  W.  118, 

91  Va.  347,  21  S.  E.  820;  Brown  v.  192.     So  where  one  partner  borrows 

Fresno  Raisin  Co.    (1894),  101  Cal.  money  on  his  own  note  to  reimburse 

222,  35  Pae.  639;  Hubenthal  v.  Ken-  another     partner     for     money     ad- 

nedy  (1888),  76  Iowa  707,  39  N.  W.  vanced  to  the  firm,  the  firm  is  not 

694;  Goodenow  v.  Jones  (1874),  75  liable.        Redenbaugh      v.      Kelton 

111.  48;  North  Penn.  Coal  Co.'s  Ap-  (1895),  130  Mo.  558,  32  S.  W.  67. 
Mech.  Part.— 17                        257 


§  291]  LAW  OF  PARTNERSHIP 

tion,  or  what  is  sometimes  loosely  called  ' '  adoption ' '  of  it,  which 
would  substitute  the  liability  of  the  partnership  for  that  of  the 
single  partner  who  made  it.8  So,  if  the  contract,  though  in 
writing,  (not  under  seal  or  negotiable)  was  originally  made  for 
and  by  the  authority  of  the  partnership,  the  partnership,  by 
the  weight  of  authority,  could  still  be  held  upon  it,  the  fact  that 
it  was  made  in  the  name  of  one  partner  only  not  being  conclu- 
sive evidence  of  an  intention  to  bind  him  alone.9 

§291. Note  of  one  partner. — Similar  questions  arise 

where  a  creditor  takes  the  note  or  other  similar  obligation  of 
one  partner  for  a  partnership  debt. 

If,  at  the  time  the  debt  is  contracted,  the  note  or  other  obliga- 
tion of  one  partner  is  taken,  and  credit  given  exclusively  to 
him,  the  firm  will  not  be  bound ; 10  but  if  credit  were  given  to 
the  firm,  the  note  or  other  obligation  (if  not  given  as  the  note 
of  the  partnership  n)  will  be  deemed  to  have  been  taken  as  col- 
lateral security  or  otherwise,  and  the  firm  may  still  be  held,  not 
upon  the  note  12  but  upon  the  original  claim.  To  whom  the 
credit  was  given  is  here,  as  in  the  preceding  section,  a  question 
of  fact  to  be  determined  in  view  of  all  the  circumstances.13 

8  See  the  discussion  of  a  somewhat  9  See   2   Mechem   on  Agency    (2d 

similar  question  under  corporations  ed.),  §§  1712-1716. 

not  yet  organized,  in  1  Mechem  on  10  See  Holmes  v.  Burton   (1837), 

Agency    (2d  ed.),   §382.     In   part-  9  Vt.  252,  31  Am.  Dec.  621,  Gilm. 

nership,     see     Eeynolds     v.     Swain  Cas.  312. 

(1839),  13  La.  193;  Penn  v.  Kearny  11  See  post,  §  296. 

(1869),  21  La.  Ann.  21;   Marks  v.  12  See   Farmers   Bank   v.   Bayless 

Chumos    (1910),   82   Kan.  562,   109  (1865),  35  Mo.  428. 

Pac.  397  (which  goes  on  theory  that  13  See  Hoeflinger  v.  Wells  (1879), 

partner  in  whose  name  a  lease  was  47  Wis.  628,  3  N.  W.  589;  Maffet  v. 

taken   would   be   a  trustee   for   the  Leuckel    (1880),  93   Pa.  468,  Gilm. 

partnership    and  the   other   partner  Cas.  317;   Smith  v.   Collins   (1874), 

would  be  liable  upon  it);  Bodey  v.  115    Mass.    388;     Mills    v.    Eiggle 

Cooper  (1896),  82  Md.  625,  34  Atl.  (1911),  83  Kan.  703,  112  Pac.  617, 

362    (which  goes  upon  ground  that  Ann.  Cas.  1912  A  616;  Beckwith  v. 

assent  of  other  partner  would  bind  Mace    (1905),    140    Mich.    157,   103 

him  for  rent   under   a   lease  under  N.  W.  559.     In  Hoeflinger  v.  Wells, 

seal  made  by  one  partner  only  but  supra,     where     the     question     waa 

in  firm  name).  whether    plaintiff    could    recover    of 

258 


WHO  BOUND  BY  ACTS  OF  PARTNER 


[§292 


If  the  obligation  of  one  partner,  e.  g.,  his  promissory  note,  be 
taken  for  a  previously  created  partnership  debt,  the  effect  de- 
pends upon  the  intention.  Such  a  note  may  be  taken  as  pay- 
ment of  the  firm  debt,  and  if  it  is  so  taken  the  firm  debt  is  gone ; 
but  in  order  to  discharge  the  firm,  according  to  the  prevailing 
rule,  the  evidence  must  be  clear  that  it  was  so  taken  in  satis- 
faction, for  this  will  not  be  presumed  from  the  mere  fact  of  the 
taking,  and  in  the  absence  of  such  evidence  the  firm  will  still 
be  bound  upon  the  debt.14 

§  292.  Same  subject — Unknown  partnership. — In  those  cases 
already  considered  in  which  it  is  held  that  the  creditor  has  re- 
course against  one  partner  only,  it  is  because  it  is  determined 
that  the  creditor  has  elected  to  give  credit  to  such  partner  alone. 
But  an  election  involves  the  opportunity  of  choice — of  choosing 
between  the  credit  of  the  firm  and  that  of  the  individual  part- 


the  firm  of  Stafford  &  Wells  for 
money  loaned  upon  Stafford's  note, 
the  court  says:  "If  upon  the  trial 
the  plaintiff  can  show  that  the 
money  was  borrowed  for  the  firm, 
that  he  was  at  the  time  advised  that 
it  was  for  the  firm,  and  that  he 
loaned  it  to  the  firm  and  upon  its 
credit,  then  the  mere  taking  of  the 
individual  note  of  the  one  partner 
for  the  money  so  loaned  will  not  de- 
feat the  action.  The  taking  of  such 
note  may  be  evidence  tending  to 
show  that  the  money  was  not  loaned 
to  the  firm,  and  that  the  sole  credit 
was  given  to  Stafford;  but  it  is  not 
conclusive  of  that  fact;  and  if  the 
jury  or  the  court  should  find  as  a 
fact  that  the  money  was  borrowed 
by  and  loaned  to  the  firm  and  upon 
its  credit,  then  the  taking  of  the  in- 
dividual note  of  one  member  of  the 
firm  would  not  be  a  payment  of  such 
firm  debt,  unless  it  was  affirmatively 
shown  that  such  note  was  taken  in 
payment  of  the  same." 


In  North  Penn.  Coal  Co.  's  Appeal 
(1863),  45  Pa.  181,  84  Am.  Dec. 
487,  the  obligation  given  by  the 
partner  was  a  bond,  apparently 
under  seal,  to  which  class  of  instru- 
ments this  rule  ordinarily  does  not 
apply.  See  post,  §  293. 

liBurdett  v.  Greer  (1908),  63  W. 
Va.  515,  60  S.  E.  497,  129  Am.  St. 
E.  1014,  15  Ann.  Gas.  935,  15  L.  R. 
A.  (N.  S.)  1019,  with  elaborate 
note;  Craswell  v.  Cattle  Co.  (1910), 
148  Iowa  9,  126  N.  W.  908;  Eey- 
burn  v.  Mitchell  (1891),  106  Mo. 
365,  16  S.  W.  592,  27  Am.  St.  E.  350. 
Compare  Crooker  v.  Crooker  (1863), 
52  Me.  267,  83  Am.  Dec.  509.  The 
note  of  one  would  be  a  good  con- 
sideration for  a  promise  to  release 
the  others:  Luddington  v.  Bell 
(1879),  77  N.  Y.  138,  33  Am.  Eep. 
601;  Stephens  v.  Thompson  (1855), 
28  Vt.  77. 


259 


§  293]  LAW   OF   PARTNERSHIP 

ner, — and  this  opportunity  of  choice  can  only  exist  where  the 
creditor  knew  that  there  was  a  partnership  at  the  time  that  he 
gave  credit.  If  he  did  not  then  know  of  the  existence  of  the 
partnership,  it  is  obvious  that  a  different  question  is  presented, 
but  it  is,  at  the  same  time,  a  question  already  considered  in 
Agency.  It  is  another  phase  of  the  liability  of  an  undisclosed 
principal — the  partnership — for  the  acts  and  contracts  of  his 
agent — the  partner.  As  to  this,  it  has  been  seen  that  an  undis- 
closed principal  when  discovered  is,  in  general,  bound  by  the 
simple  contracts  of  his  agent,  although  at  the  time  the  other 
party  gave  credit  to  the  agent  alone,  supposing  him  to  be  the 
principal.  Two  exceptions  to  this  rule  were  found  to  prevail: 
1.  That  the  principal  cannot  be  held  where  he  had  been  previous- 
ly led  by  the  creditor's  conduct  to  settle  with  the  agent  upon 
the  assumption  that  the  agent  had  paid  such  creditor;  and  2. 
That  the  principal  cannot  be  held  where,  after  his  discovery, 
the  creditor  has  elected  to  give  credit  to  the  agent  alone.15  This 
rule  applies  in  the  case  of  partnerships,  and  subject  to  the  ex- 
ceptions named,  the  undisclosed  partners  are  liable,  when  dis- 
.  covered,  upon  the  simple  contracts  made  really  in  behalf  of  the 
firm  though  ostensibly  by  one  partner  only.16  This  rule  that  the 
creditor  may  hold  the  undisclosed  or  dormant  partners  liable 
confers  a  right  but  does  not  impose  a  duty ;  that  is,  the  creditor 
has  usually  his  option  to  sue  all  or  only  the  one  with  whom  he 
dealt — he  may  sue  all,  but  is  not  obliged  to  do  so.17 

§  293.  Same  subject — Contracts  under  seal. — In  case  the  con- 
tract or  obligation  executed  by  the  single  partner  was  a  bond, 
deed  or  other  instrument  under  seal,  different  rules  apply  for 
technical  reasons.  In  such  a  case,  where  the  common-law  inci- 
dents of  a  seal  still  exist,  all  previous  obligations  if  any  are 
usually  deemed  to  be  merged  in  the  bond  or  deed,  and  only 

15  See    2     Mechem     on     Agency,  Buffmn  (1850),  22  Vt.  181,  54  Am. 
§§  1729-1772.  Dec.  64,  Meehem's  Gas.  385. 

16  Bee  Beckham  v.  Drake  (1841),  17  Cleveland  v.  Woodward  (1843), 
9   Mees.   &  Wels.   79;    Eeynolds  v.  15  Vt.  302,  40  Am.  Dec.  682,  Me- 
Cleveland  (1825),  4  Cowen  (N.  Y.)  chem's  Gas.  388. 

282,    15   Am.   Dee.   369;    Griffith   v. 

260 


WHO  BOUND  BY   ACTS  OF   PARTNER  [§  294 

those  persons  who  are  named  as  parties  to  it  can  sue  or  be  sued ; 
hence  if  one  partner  gives  his  own  sealed  obligation,  or  enters 
into  a  contract  under  seal,  the  other  partners  cannot  be  held  at 
law,  either  upon  the  instrument  itself  or  upon  the  consideration, 
by  showing  the  contract  was  really  made  in  behalf  of  the  firm 
or  that  it  received  the  benefit  of  it,18  except  where  the  seal  can 
be  regarded  as  surplusage.19  But  if  there  was  originally  a  part- 
nership obligation,  which  at  law  was  deemed  to  be  merged  in 
the  specialty  executed  by  one  partner,  equity  may  at  times,  on 
the  insolvency  of  that  partner,  allow  relief  against  the  others 
who,  but  for  such  merger,  would  be  liable.20 

§294.  Same   subject — Judgment   against   one   partner. — A 

judgment  against  one  partner  alone  for  a  partnership  debt,  by 
the  common  law,  discharges  the  other  partners  whether  osten- 
sible or  secret.  The  judgment  is  a  higher  security  which  ordi- 
narily merges  the  lower;  and,  besides,  the  liability  of  the  part- 
ners is  a  joint  one,  upon  which  they  cannot  usually  be  separ- 
ately sued.21 

This  effect  of  a  judgment  as  a  merger  has  been  altered  in 
several  States  by  statute,22  and  statutes  in  several  States  make 

18  See  Tom  v.  Goodrich  (1807),  2  19  See  as  to  this,  ante,  §263. 

Johns.   (N.  Y.)   213;  United  States  20  As  to  a  liability  in  equity,  see 

v.  Astley  (1819),  3  Wash.  (U.  S.  C.  Alexander  v.  Alexander   (1888),  85 

C.)    508   (but  see  U.   S.  v.  Lyman  Va,  353,  7  S.  E.  335,  1  L.  R.  A.  125; 

(1818),  1  Mason  U.  S.  C.  C.  482,  Niday  v.   Harvey   (1852),  9  Gratt. 

506);  North  Penn.  Coal  Coal  Co.'s  (Va.)  454. 

Appeal   (1863),  45  Pa.  St.  181,  84  21  See  Mason  v.  Eldred  (1867),  73 

Am.  Dee.  487;   Williams  v.  Gillies  U.  S.  (6  Wall.)  231,  18  L.  ed.  783, 

(1878),  75  N.  Y.   197,  Burd.  Gas.  Mechem's  Cas.  433,  Burd.  Gas.  388, 

290.  Gilm.    Cas.    281;    Candee    v.    Clark 

In  Paris  v.  Cook  (1901),  110  Ky.  (1851),  2  Mich.  255;  Ward  v.  John- 

867,  62  S.  W.  1043,  63  S.  W.  600,  23  son  (1816),  13  Mass.  148;  Smith  v. 

Ky.  L.  R.  328,  it  was  held  that  the  Black   (1822),  9  Serg.  &  R.   (Pa.) 

other  partners  could  be  held  upon  a  142,  11  Am.  Dec.  686;  Wann  v.  Mc- 

bond  signed  by  one  only  upon  proof  Nulty    (1845),   7  111.   355,   43   Am. 

that  its  execution  in  that  form  was  Dec.  58;  Suydam  v.  Barber  (1858), 

by  the  authority  of  the  others  and  18  N.  Y.  468,  75  Am.  Dee.  254.  See, 

on  their  account.     It  was,  for  the  also,  post,  §§  210,  211. 

time  being,   making  that   partner's  22  See    Mason    v.    Eldred,    supra: 

name  the  firm  name.  Tibbetts  v.  Shapleigh  (1881),  60  N. 

261 


§  295]  LAW  OP  PARTNERSHIP 

partnership  obligations  joint  and  several.23  The  Uniform  Part- 
nership Act  does  not  make  this  change.24 

Moreover,  it  has  been  held  in  a  number  of  States,  even  in  the 
absence  of  a  statute,  that  where  the  debtors,  at  the  time  of  the 
action,  reside  in  different  States,  so  that  no  one  court  by  its 
process  can  acquire  jurisdiction  over  all  of  them,  a  judgment 
against  part  in  a  court  having  jurisdiction  over  them,  will,  if 
unsatisfied,  be  no  bar  to  a  later  judgment  against  the  others  in 
a  court  having  jurisdiction  over  them.25 

§  295.  Contracts  made  in  individual  names  of  all  the  part- 
ners.— "Where  a  firm  name  has  been  adopted,  it  should  be  used 
in  partnership  transactions,  and,  as  a  rule,  the  partnership  can- 
not be  bound  as  such  by  any  other  name.  But  this  rule  is  not 
inflexible,  and  between  themselves  partners  may  adopt  such 
names  as  they  please.  They  may  also  do  this  as  to  creditors  if 
the  transaction  is  really  a  partnership  transaction  and  for  its 
benefit.  Thus,  though  an  obligation  signed,  not  in  the  firm  name, 
but  in  the  individual  names  of  all  of  the  partners,  is  prima  facie 
an  individual  transaction  and  not  a  partnership  one,  it  may  be 
shown  to  be  a  partnership  transaction  not  only  between  the 
partners  themselves,  but  also  in  favor  of  the  obligee  and  against 
other  creditors  of  the  firm.26  Parol  evidence  is  admissible  for 

H.  487;  Odom  v.  Denny  (1860),  82  v.  Little   (1838),  9  N.  H.  259,  32 

Mass.   (16  Gray)    114;   Campbell  v.  Am.    Dee.    357;     Cox    v.    Maddux 

Steele  (1849),  11  Pa.  St.  394;  Bone-  (1880),  72  Ind.  206;   Merriman  v. 

steel  v.  Todd   (1861),  9  Mich.  371,  Barker   (18S9),  121  Ind.  74,  22  N. 

80  Am.  Dec.  90;  Wood  v.  Watkin-  E.  992;   Brown  v.  Birdsall   (1859), 

son   (1846),  17  Conn.  500,  44  Am.  29  Barb.  (N.  Y.)  549;  Hitchcock  v. 

Dee.  562.  Frackelton   (1898),   116  Mich.  487, 

23  In  some  of  the  states,  the  gen-  74  N.  W.  720 ;  even  though  note  was 
eral  statutes  making  the  liability  on  made  in  a  state  where  the  judgment 
joint    contracts    joint    and    several,  would  be  a  bar:    Wiley  v.  Holmes 
have  been  held  not  to  apply  to  part-  (1859),   28   Mo.  286,   75   Am.  Dec. 
nership  debts;  in  others,  contra.   See  126.      Foreign    judgment    no    bar: 
post,  §  308.  Eastern  Townships   Bank  v.   Beebe 

24  See.  15.  (1880),   53   Vt.   177,  38  Am.  Rep. 

25  See  Band  v.  Nutter  (1868),  56  665. 

Me.  339;  Yoho  v.  McGovern  (1884),  26  See  Berkshire  Woolen  Co.  v. 
42  Ohio  St.  11;  Tibbetts  v.  Shap-  Juillard  (1879),  75  N.  Y.  535,  31 
leigh  (1881),  60  N.  H.  487;  Olcott  Am.  Eep.  488,  Mechem's  Gas.  389, 

262 


WHO   BOUND   BY   ACTS   OP   PARTNER 


[§  296 


this  purpose :  it  does  not  contradict  the  writing,  nor  violate  the 
rule  that  no  one  but  a  party  to  it  can  be  held  upon  a  negotiable 
instrument.27 

§296.  Contracts  where  firm  does  business  in  name  of  one 
partner. — It  is  not  uncommon,  as  has  been  seen,  for  a  partner- 
ship to  do  business  in  the  name  of  a  single  partner,  and  con- 
tracts made  in  that  name  for  the  partnership  will  bind  all  mem- 
bers.28 If  that  partner  carries  on  no  individual  business  sep- 
arate from  that  of  the  firm,  contracts  made  in  such  name  will 
be  presumed  to  bind  the  partnership ;  if  he  does  carry  on  a  sep- 
arate business,  no  such  presumption  arises,  and  the  person  who 
would  charge  the  partnership  upon  a  contract  made  in  the  name 
of  such  partner  must  show  that  it  was  intended  to  bind  the  part- 
nership.29 


Gilm.  Cas.  156;  Mix  v.  Shattuek 
(1878),  50  Vt.  421,  28  Am.  Eep. 
511;  Freeman  v.  Campbell  (1880), 
55  Cal.  197;  Iddings  v.  Pierson 
(1884),  100  Ind.  418;  Warriner  v. 
Mitchell  (1889),  128  Pa.  St.  153,  18 
Atl.  337;  Carson  v.  Byers  (1885), 
67  Iowa  606,  25  N.  W.  826;  Drey- 
fus v.  Union  Bank  (1896),  164  I1L 
83,  45  N.  E.  408,  Burd.  Cas.  139; 
Howell  v.  Moores  (1889),  127  111. 
67,  19  N.  E.  863;  Rouse  v.  Wallace 
(1897),  10  Colo.  App.  93,  50  Pac. 
366;  Davis  v.  Turner  (1903),  56  C. 
C.  A.  669,  120  Fed.  605;  In  re  Kuhn 
(1917),  241  Fed.  935;  Purvis  v. 
Butler  (1891),  87  Mich.  248,  49  N. 
W.  564. 

So  although  the  firm  name  is  "C. 
W.  Rollins,"  a  note  made  in  the 
course  of  the  business  but  signed 
"C.  W.  Eollins  &  Co.,"  may  bind 
the  partnership.  Baxter  v.  Rollins 
(1894),  90  Iowa  217,  57  N.  W.  838, 
48  Am.  St.  R.  432. 

In  Colwell  v.  Weybossit  Bank 
(1888),  16  R.  I.  288,  15  Atl.  80,  17 
Atl.  913,  it  was  shown  that  it  was 


the  custom  of  the  partners  to  borrow 
money  on  notes  signed  by  one  part- 
ner and  endorsed  by  the  other.  Held, 
to  be  partnership  obligations. 

But  if  the  note  was  not  in  fact  the 
obligation  of  the  partnership  the 
fact  that  all  the  partners  signed  it 
as  individuals  will  not  make  it  such. 
Lill  v.  Egan  (1878),  89  111.  609. 

27  See  Dreyfus  v.  Union  Bank, 
supra. 

28 See  Rumsey  v.  Briggs  (1893), 
139  N.  Y.  323,  34  N.  E.  929 ;  Gavin 
v.  Walker  (1885),  82  Tenn.  (14 
Lea)  643;  Pitkin  v.  Benfer  (1892), 
50  Kan.  108,  31  Pac.  695,  34  Am. 
St.  R.  110,  Mechem  's  Cas.  383 ;  Bax- 
ter v.  Rollins  (1894),  90  Iowa  217, 
57  N.  W.  838,  48  Am.  St.  R.  432. 

29  See  United  States  Bank  v.  Bin- 
ney  (1828),  5  Mason  (U.  S.  C.  C.), 
189 ;  Yorkshire  Banking  Co.  v.  Beat- 
son  (1880),  L.  R.  5  C.  P.  Div.  109, 
Burd.  Cas.  141,  Gilm.  Cas.  157,  317; 
Bank  of  Rochester  v.  Monteath 
(1845),'  1  Denio  (N.  Y.)  402,  43 
Am.  Dec.  681. 


§§297,298]  LAW   OP   PARTNERSHIP 

§  297.  Particular  contract  made  by  firm  in  name  of  one  part- 
ner.— It  is  also  possible  tbat  while  the  name  of  one  partner 
was  not  regularly  used  as  the  firm  name,  it  was  so  used  upon  a 
particular  occasion  with  the  authority  and  consent  of  all  the 
partners.  It  may  thus  become  pro  hac  vice  the  firm  name,  and 
all  the  partners  will  be  charged  by  its  use.30  It  may  also  be 
the  fact  that  the  firm  had  no  regular  name  at  all,  but  used  the 
name  of  one  or  the  other  of  the  partners  as  the  occasion  might 
suggest  or  convenience  require.81  Parol  evidence  is  competent 
to  show  such  a  fact. 

§298.  Contracts  where  there  are  two  firms  of  same  name 
with  common  partner. —  Cases  occur,  though  they  are  com- 
paratively rare,  where  two  firms  are  doing  business  under  the 
same  name  in  the  same  locality,  and  having  one  or  more  but 
not  all  of  their  members  in  common.  It  was  thought  at  one 
time  that  where  a  contract  was  made  in  such  firm  name  by  the 
common  partner,  and  the  other  party  did  not  know  for  which 
of  the  firms  he  assumed  to  act,  either  firm  could  be  held  at  the 
option  of  the  other  party,  but  that  Iboth  could  not  be  held.  The 
true  rule  seems  to  be,  however,  that  such  cases  stand  upon  no 
peculiar  ground,  but  that  that  partnership  only  is  to  be  held 
which  by  the  facts  and  circumstances  is  pointed  out  as  the  one 
for  which  the  partner  acted.32  The  partners  may,  by  their  con- 
so  See  Jacks  v.  Greenhaw  (1912),  (1870),  29  Iowa  462;  Seekell  v. 
105  Ark.  615,  152  S.  W.  160;  Na-  Fletcher  (1880),  53  Iowa  330,  5  N. 
tional  Exch.  Bank  v.  Wilgus  (1894),  W.  200;  Dockery  v.  Faulkner 
95  Ky.  309,  25  S.  W.  2,  15  Ky.  L.  K.  (1907),  101  S.  W.  501  (Tex.  Civ. 
763;  Carter  v.  Mitchell  (1893),  94  App.). 

Ky.  261,  22  S.  W.  83,  15  Ky.  L.  E.  32  See  Hastings  National  Bank  v. 
53;  Thomas  v.  Hardsocg  (1908),  Hibbard  (1882),  48  Mich.  452,  12  N. 
137  Iowa  597,  115  N.  W.  210  (note  W.  651,  Mechem's  Gas.  392;  Fos- 
made  in  name  of  managing  partner),  dick  v.  VanHorn  (1884),  40  Ohio 
There  is  nothing  in  Farmers  Bank  St.  459;  Swan  v.  Steele  (1806),  7 
v.  Bayless  (1865),  35  Mo.  428,  con-  East  210.  In  Hastings  National 
trary  to  this.  The  court  pointed  out  Bank  v.  Hibbard,  supra,  it  appeared 
that  there  was  no  claim  or  proof  on  that  a  firm  of  three  partners,  en- 
this  point.  gaged  in  operating  a  particular 

31  See      Barcroft      v.       Haworth      flouring  mill,   temporarily  arranged 

264 


WHO  BOUND  BY   ACTS  OF   PARTNER          [§§  299,300 


duet,  lead  him  to  believe  that  he  is  dealing  with  one  of  the  firms 
rather  than  the  other,  and  where  they  do  so  their  personal  re- 
sponsibility may  be  determined  accordingly.83 

§299.  Contracts  where  same  persons  constitute  different 
firms  with  different  names. — The  same  persons  may  compose 
different  partnerships  with  different  names.  They  are  all,  of 
course,  liable  for  the  debts  of  each  partnership,  but  their  rights 
and  liabilities  among  themselves  may  differ  in  the  several  part- 
nerships, and  the  distribution  of  the  assets  of  the  several  firms 
may  be  governed  by  different  considerations.34 

§300.  Liability  of  partner  who  exceeds  his  authority. — A 
partner,  like  other  agents,  may  incur  individual  liability  by  as- 
suming to  act  without  sufficient  authority.  In  such  cases  he 


to  take  in  another  partner  and  run 
an  additional  mill  as  another  firm. 
Both  firms,  however,  had  the  same 
name  and  used  the  same  letterheads, 
upon  which  the  names  of  all  four 
partners  were  printed,  but  the  busi- 
ness of  the  two  mills  was  kept  dis- 
tinct. The  second  mill  kept  no 
bank  account,  but  borrowed  from  the 
first  when  necessary,  and  kept  its 
account  with  it.  One  of  the  original 
partners  made  a  note  in  the  firm 
name  and  discounted  it  at  the  plain- 
tiff's  bank.  In  an  action  by  the 
bank  the  jury  found  that  the  bank 
relied  exclusively  upon  the  credit  of 
the  original  partners.  It  was  not 
claimed  that  the  money  was  bor- 
rowed or  used  for  the  benefit  of  the 
later  firm.  It  was  therefore  held 
that  tEe  additional  partner  could  not 
be  held  liable. 

33  See  Adams  v.  Brown  (1865),  16 
Ohio  St.  75.  Where  there  are  two 
firms  with  a  common  partner  and 
much  of  the  time  doing  business 
under  the  same  name,  the  creditor 


may  recover  from  that  firm  with 
which,  in  the  exercise  of  ordinary 
prudence,  he  was  justified  in  believ- 
ing he  was  dealing:  Baker  v.  Nap- 
pier  (1856),  19  Ga.  520.  A  partner, 
not  in  the  firm  actually  concerned, 
but  in  the  other,  cannot  be  held  un- 
less the  plaintiff,  exercising  ordi- 
nary prudence,  has  reasonably  been 
led  to  believe  that  he  was  dealing 
with  the  other.  Gushing  v.  Smith 
(1875),  43  Tex.  261.  Where  a  firm 
carries  on  business  in  one  town,  and 
one  of  the  partners  has  a  separate 
business  in  another  town,  the  firm 
cannot  be  held  for  goods  supplied 
to  the  single  partner  at  the  latter 
place,  if  they  were  not  in  fact  pur- 
chased for  the  firm  and  the  seller 
had  no  reason  to  think  they  were  ex- 
cept that  they  were  ordered  in  the 
firm  name.  Samstag  v.  Ottenheimer 
(1916),  90  Conn.  475,  97  Atl.  865. 

34  See  post,  §  461. 

See  also  Second  Nat.  Bank  v. 
Burt  (1883),  93  N.  Y.  233. 


265 


§  301]  LAW  OP  PARTNERSHIP 

may  make  express  representations  as  to  his  authority,  and  he 
may  likewise  make  an  implied  representation  by  assuming  to 
act  as  a  partner.  For  a  breach  of  either  of  these  representa- 
tions he  may  be  held  liable  to  third  persons  who  are  injured  by 
reason  of  his  undertaking  to  bind  the  firm  when  he  had  no 
authority  so  to  do.  Whether  he  can  be  held  upon  the  very  con- 
tract which  he  has  made  without  authority,  depends  upon 
whether  the  contract  contains  apt  words  to  charge  him  person- 
ally. His  liability  in  these  cases  is  ordinarily  made  to  depend 
upon  the  familiar  rules  which  make  an  agent  liable  who  has  ex- 
ceeded his  authority  or  who  has  assumed  to  act  for  a  principal 
having  no  legal  existence.35 

There  is,  however,  less  occasion  to  resort  to  these  rules  in 
partnership  eases,  because  a  partner  normally  expects  to  bind 
himself  as  one  of  the  contracting  parties  on  every  obligation  he 
incurs  for  the  partnership,  while  the  ordinary  agent  normally 
does  not  intend  to  bind  himself  at  all  but  only  his  principal. 
If  it  be  assumed  that  the  firm  name  is  always  the  name  of  the 
partner  who  uses  it,  for  the  purposes  of  that  transaction,86 
then  he  would  always  be  bound  (unless  the  contrary  were  stipu- 
lated) even  though,  for  lack  of  authority,  he  did  not  bind  his 
copartner  also  by  the  same  name. 

II.   IN  TORT. 

§301.  Firm  liable  for  torts  of  one  partner  committed  in 
course  of  business. — The  liability  of  the  partnership  for  the 
torts  of  one  partner  rests  upon  the  same  foundation  as  the  lia- 
bility of  a  principal  for  the  torts  of  his  agent,  which  has  been 

35  See    Mechem    on    Agency    (2d  instrument    executed    without    ade- 

ed.),  §§1363,  1383;  Taft  v.  Church  quate   authority);    Bitzer  v.   Shunk 

(1895),    162    Mass.    527,   39   N.   E.  (1841),  1  W.  &  S.    (Pa.)    340,  37 

283;    North    Star    Co.    v.    Stebbins  Am.  Dee.  469   (confession  of  judg- 

(1893),  3   So.  Dak.  540,  54  N.  W.  ment   without   adequate   authority). 

593;    Silvers   v.    Foster    (1872),    9  36  See  Haskins  v.  D 'Este  (1882), 

Kan.   56;    Gunderson  v.   Hasterlick  133  Mass.  356;  Bonneau  v.  Strauss 

(1902),  100  111.  App.  429;  Hubbard  (1919),  —  Okla,  — ,  179  Pac.  10,  4 

v.  Matthews   (1873),  54  N.  Y.  43,  A.  L.  B.  255  and -note  (liable  on  the 

13   Am.   Eep.   562;    Weeks  v.  Bake  contract). 
Co.  (1877),  58  N.  H.  101  (on  sealed 

266 


WHO   BOUND  BY   ACTS  OF   PARTNER 


[§301 


already  considered.  '*  Thus,  the  partners  are  liable  in  a  civil 
action  for  the  negligence  of  one  partner,  committed  in  the  trans- 
action of  partnership  business;  as,  for  example,  where  one  of  a 
firm  of  lawyers  or  physicians  causes  loss  to  a  client  or  a  patient 
by  a  want  of  professional  skill  or  a  failure  to  use  due  care  or 
diligence.87 

This  liability  of  the  partners  is  not,  however,  confined  to 
actions  based  upon  a  partner's  negligence;  they  are  liable  also 
for  his  trespass,  fraud,  deceit,  misrepresentation  or  malice,  if 
committed  in  the  course  of  the  partnership  business  and  in  fur- 
therance of  its  interests;  as,  for  example,  where  one  partner 
in  the  prosecution  of  the  partnership  business  wrongfully  seizes 
the  property  of  a  third  person,  or  institutes  malicious  prosecu- 
tions, or  is  guilty  of  a  libel.38  A  greater  liability  still  may  also 


37 See  Hess  v.  Lowrey  (1889),  122 
Ind.  225,  23  N.  E.  156,  17  Am. 
St.  E.  355,  Mechem's  Gas.  400; 
Hyrne  v.  Erwin  (1885),  23  S.  C. 
226,  55  Am.  Eep.  15;  Collier  v.  Me- 
Call  (1887),  84  Ala.  190,  4  So.  367; 
Haley  v.  Case  (1886),  142  Mass. 
316,  7  N.  E.  877;  Bucki  v.  Cone 
(1889),  25  Fla.  1,  6  So.  160;  Whit- 
taker  v.  Collins  (1885),  34  Minn. 
299,  25  N.  W.  632,  57  Am.  Eep.  55; 
Linton  v.  Hurley  (1859),  80  Mass. 
(14  Gray)  191;  Hobbs  v.  Chicago 
Packing  Co.  (1896),  98  Ga.  576,  25 
S.  E.  584,  58  Am.  St.  E.  320,  Burd. 
Cas.  349  (conversion) ;  Monmouth 
College  v.  Dockery  (1911),  241  Mo. 
522,  145  S.  W.  785. 

38  See  Strang  v.  Bradner  (1884), 
114  U.  S.  555,  29  L.  ed.  248,  Me- 
chem's Cas.  413;  Stanhope  v.  Swaf- 
ford  (1890),  80  Iowa  45,  45  N.  W. 
403;  Myers  v.  Lewis  (1917),  121  Va. 
50,  92  S.  E.  988;  Wolf  v.  Mills 
(1870),  56  111.  360,  Gilm.  Cas.  397; 
Morehouse  v.  Northrop  (1866),  33 
Conn.  380,  89  Am.  Dee.  211;  Locke 
v.  Stearns  (1840),  1  Mete.  (Mass.) 


560,  35  Am.  Dec.  382,  Mechem's 
Cas.  422;  Chester  v.  Dickerson 
(1873),  54  N.  Y.  1,  13  Am.  Eep. 
550,  Mechem's  Cas.  38;  Jacobs  v. 
Shorey  (1868),  48  N.  H.  100,  97 
Am.  Dec.  586,  Meehem's  Cas.  164; 
Brundage  v.  Mellon  (1895),  5  N. 
Dak.  72,  63  N.  W.  209,  Burd.  Cas. 
348;  Haney  Mfg.  Co.  v.  Perkins 
(1889),  78  Mich.  1,  43  N.  W.  1073, 
Gilm.  Cas.  396;  Lathrop  v.  Adams 
(1882),  133  Mass.  471,  43  Am.  Eep. 
528,  Mechem's  Cas.  425. 

The  individual  property  of  an  in- 
nocent partner  is  not  liable  to  at- 
tachment for  a  firm  debt  fraudulent- 
ly contracted  by  a  copartner.  Jaf- 
frey  v.  Jennings  (1894),  101  Mich. 
515,  60  N.  W.  52,  25  L.  E.  A.  645, 
Mechem's  Cas.  416.  No  attachment 
on  the  ground  of  non-residence  if 
one  of  the  partners  resides  in  the 
state.  Blair  v.  Eussell  (1919),  — 
Miss.  — ,  81  So.  785. 

Not  liable  under  Georgia  Code: 
Hendrieks  v.  Middlebrooks  (1903), 
118  Ga.  131,  44  S.  E.  835  (slander). 


267 


§§302,303] 


LAW   OP   PARTNERSHIP 


be  incurred  by  a  previous  authorization  or  a  subsequent  rati- 
fication. 

§302.  Liability  of  firm  for  partner's  malicious  or  criminal 
act. — But  the  partners  would  not  be  liable,  unless  previously 
authorized  or  subsequently  ratified,  for  similar  acts  committed 
by  the  partner  outside  the  course  of  the  partnership  business 
and  for  his  own  purposes  or  from  his  own  private  malice  or  ill- 
will.89 

Neither  can  one  partner,  not  personally  in  fault,  ordinarily 
be  held  liable  in  a  criminal  or  penal  action  for'  the  acts  of  his 
partner.40 

§303.  Uniform  Partnership  Act. — "Where,  by  any  wrong- 
ful act  or  omission  of  any  partner  acting  in  the  ordinary  course 
of  the  business  of  the  partnership,  or  with  the  authority  of  his 
copartners,  loss  or  injury  is  caused  to  any  person,  not  being  a 


39  See  Eosenkrans  y.  Barker 
(1885),  115  111.  331,  56'  Am.  Eep. 
169,  Mechem's  Gas.  405  (lays  down 
a  doubtful  rule) :  Bernheimer  v. 
Becker  (1905),  102  Md.  250,  62  Atl. 
526,  111  Am.  St.  E.  356,  3  L.  E.  A. 
(N.  S.)  221;  Marks  v.  Hastings 
(1892),  101  Ala.  165,  13  So.  297 
(all  cases  of  false  imprisonment  or 
wrongful  arrest).  Compare  Mcllroy 
v.  Adams  (1877),  32  Ark.  315; 
Haney  Mfg.  Co.  v.  Perkins  (1889), 
78  Mich.  1,  43  N.  W.  1073 ;  Staples 
v.  Sehmid  (1893),  18  E.  I.  224,  26 
Atl.  193,  19  L.  E.  A.  824;  Eobinson 
v.  Goings  (1886),  63  Miss.  500; 
Peckham  Iron  Co.  v.  Harper  (1884), 
41  Ohio  St.  100. 

In  Gwynn  v.  Duffield  (1885),  66 
Iowa  708,  24  N.  W.  523,  55  Am. 
Rep.  286,  firm  held  not  liable  for 
negligence  of  one  partner  in  a  drug 
firm  in  giving  away  medicine,  that 
act  not  being  in  course  of  business. 
In  Davis  v.  Dodson  (1905),  95  Ga. 


718,  22  S.  E.  645,  51  Am.  St.  E.  108, 
29  L.  E.  A.  496,  Mechem  's  Cas.  942, 
firm  held  not  liable  for  misconduct 
of  partner  who  had  agreed,  for  in- 
ducement moving  to  himself  only,  to 
collect  a  debt  without  charge.  Firm 
not  liable  for  slander  unless  words 
spoken  in  course  of  business:  Du- 
quesne  Distributing  Co.  v.  Green- 
baum  (1909),  135  Ky.  182,  121  S. 
W.  1026,  21  Ann.  Cas.  481,  24  L.  E. 
A.  (N.  S.)  955. 

40  See  Watson  v.  Hinchman 
(1879),  42  Mich.  27,  3  N.  W.  236; 
McNeely  v.  Haynes  (1877),  76  N. 
C.  122  (arrest  for  fraud  under 
fraudulent  debtors'  act).  Partner 
not  liable  to  statutory  penalty  for 
"willfully  and  knowingly"  cutting 
timber,  where  he  was  entirely  inno- 
cent, and  the  cutting  had  been  done 
by  his  copartner,  Williams  v.  Hcn- 
dricks  (1897),  115  Ala.  277,  22  So. 
439,  67  Am.  St.  E,  32,  41  L.  E.  A. 
650,  Meehem's  Cas.  948. 


268 


WHO   BOUND   BY   ACTS   OF   PARTNER  [  §  §  304,  305 

partner  in  the  partnership,  or  any  penalty  is  incurred,  the  part- 
nership is  liable  therefor  to  the  same  extent  as  the  partner  so 
acting  or  omitting  to  act. ' ' 41 

§304.  Liability  of  firm  for  partner's  breach,  of  trust. — 

Breaches  of  trust  or  misappropriation  by  one  partner  in  respect 
of  funds  or  property  which  come  into  the  possession  of  the  part- 
nership in  the  course  of  its  business  will  make  the  partners  re- 
sponsible ; 42  but  they  will  not  be  responsible,  as  for  breach  of 
trust,  because  one  partner  wrongfully  employs  in  the  partner- 
ship business  funds  of  which  he  alone  was  trustee,  if  his  part- 
ners were  ignorant  of  the  source  of  the  money  or  of  his  want 
of  title  to  it,43  though  they  would  be  so  liable  if  they  had  such 
knowledge.44 

The  question  of  following  and  recovering  the  fund  as  a  trust 
fund,  if  still  extant  and  traceable,  involves  different  considera- 
tions ;  *5  as  does  the  question  whether  the  other  partner  who  had 
in  good  faith  put  in  his  capital  against  the  first  partner's  con- 
tribution out  of  the  trust  fund,  would  be  considered  a  purchaser 
for  value.46 

§305.  The  Uniform  Partnership  Act  provides  that  "The 
partnership  is  bound  to  make  good  the  loss: 

41  Sec.  13.  Englar  v.  Offutt,  supra.    The  knowl- 

42  See  Todd  v.  Jackson  (1881),  75  edge  of  the  guilty  partner  is  not  im- 
Ind.     272;     Momnouth     College    v.  puted  to   his   partners:     Gilruth  v. 
Dockery   (1911),  241  Mo.  522,  145  Deeell,  supra;  Bienenstrk  v.  Ammi- 
S.    W.    785;     Harman    v.    Johnson  down  (1898),  155  N.-Y.  47,  49  N.  E. 
(1853),  2  El.  &  Bl.  61,  Gilm.  Gas.  321;    Palmer    v.    Scott    (1880),    68 
399.  Ala.  380  holds  firm  responsible  with- 

43  See  Englar  v.  Offutt  (1889),  70  out  knowledge. 

Md.  78,  16  Atl.  497,  14  Am.  St.  Eep.  44  See  Guillou  v.  Peterson  (1879), 
332,  Mechem's  Gas.  398;  Gilruth  v.  89  Pa.  163;  Penn  v.  Folger  (1899), 
Deeell  (1894),  72  Miss.  232,  16  So.  182  111.  76,  55  N.  E.  192;  Carter  v. 
250,  Burd.  Gas.  351,  Gilm.  Gas.  401;  Lipsey  (1883),  70  Ga.  417;  Hutch- 
Shaffer  v.  Martin  (1898),  25  N.  Y.  inson  v.  Smith  (1837),  7  Paige  (N. 
App.  Div.  501,  49  N.  Y.  S.  853;  Y.)  26. 

Jaques  v.  Marquand  (1826),  6  Cow.  45  See  Englar  v.  Offutt,  supra. 

(N.    Y.)     497;     Payne    v.    Dexter  46  See  Hollenback  v.  More  (1878), 

(1912),  211  Mass.  1,  97  N.  E.  77.  44  N.  Y.  Super.  107. 
Neither  are  they  liable  as  debtors: 

269 


§  305]  LAW   OF   PARTNERSHIP 

(a)  Where  one  partner  acting  within  the  scope  of  his  appar- 
ent authority  receives  money  or  property  of  a  third  person  and 
misapplies  it;  and 

(b)  Where  the  partnership  in  the  course  of  its  business  re- 
ceives money  or  property  of  a  third  person  and  the  money  or 
property  so  received  is  misapplied  by  any  partner  while  it  is  in 
the  custody  of  the  partnership. ' ' 47 

47  Sec.  14. 


270 


CHAPTER  XII. 

OF    THE    LIABILITY    OF    THE    FIEM    FOR    THE    ACTS    OF    ITS; 
AGENTS  AND  SERVANTS. 

§  306.  Firm  liable  like  other  princi- 
pals for  acts  of  its  servants 
and  agents. 

§306.  Firm  liable  like  other  principals  for  the  acts  of  its 
servants  and  agents. — It  seems  desirable  to  call  attention — 
not  for  the  purpose  of  discussion  but  that  it  may  not  be  over- 
looked— to  the  liability  of  the  firm  for  the  acts  of  its  ordinary 
servants  and  agents.  The  discussion  of  the  preceding  chapter 
was  devoted  to  the  acts  of  the  partner  as  agent  of  the  firm,  but 
the  firm  may,  as  has  been  seen,  employ  all  the  agents  and  serv- 
ants, who  are  not  partners,  that  the  business  may  demand.  For 
the  acts  of  these  agents  and  servants,  whether  in  contract  or  in 
tort,  the  firm  is  liable  in  the  same  cases  and  upon  the  same  con- 
ditions as  any  other  principal  or  master. 

The  discussion  of  this  liability  belongs,  therefore,  to  treatises 
upon  the  law  of  agency  and  master  and  servant;  with  the  for- 
mer of  which,  at  least,  it  is  assumed  that  the  student  is  already 
familiar. 


271 


CHAPTER  XIII. 


OF  THE  NATURE  AND  EXTENT  OF  THE  LIABILITY  OF 
PARTNERS. 


§  314.  Individual  property  of  part- 
ner may  be  taken  to  satisfy 
partnership  debt. 

315.  Partner     paying     debt     may 

have  contribution. 

316.  Exemptions     from     execution 

on  partnership  property. 

III.  OF  THE  BEGINNING  AND  ENDING 
OF  LIABILITY. 

317.  In  general. 

318, 319.  Of  an  incoming  partner 
under  the  common  law. 

320.  Under       the        Uniform 

Partnership  Act. 

321,  322.  Of  an  outgoing  partner. 


§  307.  In  general. 

I.  OF  THE  NATURE  OF  PARTNERSHIP 

OBLIGATIONS. 

308.  Partnership  obligations  when 

arising     on     contract     are 
joint. 

309,  310.  Judgment       against 

one  partner  releases  others. 

311.  Release   of   one   releases 

all. 

312.  Partnership    obligations   aris- 

ing from  tort  are  joint  and 
several. 

II.  OF   THE   EXTENT   OF  PARTNER- 

SHIP LIABILITY. 

313.  Each  partner  liable  in  solido 

for  partnership  obligations. 

§  307.  In  general. — The  question  of  the  liability  of  partners 
involves  both  the  nature  of  xthat  liability  and  its  extent.  These 
subjects,  therefore,  will  be  separately  considered. 

I.  OP  THE  NATURE  OF  PARTNERSHIP  OBLIGATIONS. 

§308.  Partnership  obligations  when  arising  on  contract  are 
joint. — The  obligation  of  those  contracts  which  are  binding 
upon  the  partnership  is,  at  common  law,  the  joint  obligation  of 
all  the  partners  and  not  the  several  obligation  of  any  of  them.1 


1  See  Haralson  v.  Campbell 
(1879),  63  Ala.  278,  Mechem's  Gas. 
430. 

Taking    judgment     against    each 


partner  separately,  for  substantially 
the  same  amount,  instead  of'  taking 
a  joint  judgment  against  all  of 
them,  is  only  an  irregularity.  Judd 


272 


NATURE   AND   EXTENT   OF   LIABILITY  [§  308 

One  partner  may,  as  has  been  seen,  bind  himself  only;  but  if 
he  binds  the  partnership,  he  binds  all  members  of  it  jointly  and 
not  severally. 

It  is  sometimes  said  that,  while  partnership  contracts  are  thus 
joint  at  law,  they  are  joint  and  several  in  equity;  but  this  seems 
to  be  true  as  respects  the  remedy  only.2 

This  doctrine  that  the  contractual  obligations  of  partners  are 
joint  has  several  important  consequences.  It  affects  the  ques- 
tion of  parties  to  actions ; 3  it  results  in  the  rule  that  a  judg- 
ment against  part,  or  a  release  to  part,  ordinarily  releases  the 
others;4  and  it  materially  affects  the  remedies  of  the  creditor 
after  the  death  of  one  of  the  partners.5 

In  some  States,  statutes  have  expressly  changed  the  rule  in 
partnership  cases.6  In  several  States,  statutes  have,  in  general 
terms,  attempted  to  make  all  joint  obligations  joint  and  several. 
In  some  of  the  States,  these  general  statutes  have  been  inter- 
preted as  applying  to  partnership  cases  as  well  as  others ; 7  in 
other  States,  they  have  been  held  not  to  apply  to  partnership 
debts.8 

The  Uniform  Partnership  Act  enacts  substantially  the  com- 
mon law  rule.9 

Oil  Co.  v.  Hubbell  (1879),  76  N.  Y.  (1867),  22  Iowa  480;  Gates  v.  Wat- 

543,  Mechem's  Gas.  431,  Gilm.  Gas.  son  (1874),  54  Mo.  585;  Williams  v. 

311.  Kogers    (1879),  77  Ky.    (14  Bush) 

2  See   post,   §  411.     And   see   the  776. 

opinions    in    Kendall    v.    Hamilton  8  See  Sherburne  v.  Hyde   (1900), 

(1879),  4  App.  Gas.  504,  Gilm.  Gas.  185  111.  580,  57  N.  E.  776;  Thomp- 

293.     See  Article  by  Professor  Bur-  son  v.  White   (1898),  25  Colo.  226, 

dick,  11  Columbia  Law  Review  101.  54  Pac.  718. 

3  See  post,  §  324.  9  Thus   see.    15,    declares:      "All 

4  See  post,  §§309-311.  partners  are  liable  (a)   jointly  and 

5  See  post,  §  411.  severally  for  everything  chargeable 
6E.    g.,    in    Alabama,    Arkansas,  to  the  partnership  under  sections  13 

District  of  Columbia,  Iowa,  Kansas,  and  14  [wrongful  acts  and  breaches 

Maryland,     Minnesota,     Mississippi,  of  trust],     (b)  Jointly  for  all  other 

Missouri,  New  Mexico,  North  Caro-  debts  and  obligations  of  the  part- 

lina,    West    Virgina.      In    some    of  nership;  but  any  partner  may  enter 

these  it  is  "for  purposes  of  suit."  into   a   separate  obligation   to  per- 

7  See  Hamilton  v.  Buxton  (1845),  form   a  partnership   contract," 
6     Ark.     24;     Eyerson    v.     Hendrie 

Mech.  Part.— 18  273 


§  309]  LAW   OF   PARTNERSHIP 

§  309.  Same  subject — Judgment  against  one  partner  releases 
others. — The  obligation  of  firm,  contracts  being  joint,  if  the 
creditor  proceeds  to  judgment  against  one  or  part  of  them  alone, 
where  no  statute  has  changed  the  rule,  he  releases  the  others.10 
In  a  leading  case  n  in  the  Supreme  Court  of  the  United  States, 
where  a  creditor  who  had  taken  judgment  against  one  partner 
upon  a  firm  note  in  one  state  sought  to  recover  against  another 
partner  in  another  state,  the  court,  through  Mr.  Justice  Field, 
said:  "It  is  true  that  each  copartner  is  bound  for  the  entire 
amount  due  on  copartnership  contracts;  and  that  this  obliga- 
tion is  so  far  several  that  if  he  is  sued  alone,  and  does  not  plead 
the  non- joinder  of  his  copartners,  a  recovery  may  be  had  against 
him  for  the  whole  amount  due  upon  the  contract,  and  a  joint 
judgment  against  the  copartners  may  be  enforced  against  the 
property  of  each.  But  this  is  a  different  thing  from  the  liability 
which  arises  from  a  joint  and  several  contract.  There  the 
contract  contains  distinct  engagements — that  of  each  con- 
tractor individually,  and  that  of  all  jointly, — and  different 
remedies  may  be  pursued  upon  each.  The  contractors  may 
be  sued  separately  on  their  several  engagements  or  together 
on  their  joint  undertaking.  But  in  copartnerships  there  is  no 
such  several  liability  of  the  copartners.  The  copartnerships  are 
formed  for  joint  purposes.  The  members  undertake  joint  en- 
terprises, they  assume  joint  risks,  and  they  incur  in  all  cases 
joint  liabilities.  In  all  copartnership  transactions  this  common 
risk  and  liability  exist.  Therefore  it  is  that  in  suits  upon  these 
transactions  all  the  copartners  must  be  brought  in,  except  where 
there  is  some  ground  of  personal  release  from  liability,  as  in- 
fancy, or  a  discharge  in  bankruptcy;  and  if  not  brought  in,  the 
omission  may  be  pleaded  in  abatement.  The  plea  in  abatement 
avers  that  the  alleged  promises,  upon  which  the  action  is  brought, 

10  See  Kendall  v.  Hamilton  82  Oreg.  357,  159  Pae.  1033;  Blythe 
(1879),  L.  E.  4  App.  Gas.  504,  Gilm.  v.  Cordingly  (1905),  20  Colo.  App. 
Cas.  293;  McMaster  v.  City  Nat.  508,  80  Pae.  495;  Thompson  v.  Em- 
Bank  (1909),  23  Okla.  550,  101  Pae.  inert  (1854),  15  111.  415. 
1103,  138  Am.  St.  E.  831;  Eyckman  11  Mason  v.  Eldred  (1867),  73  U. 
v.  Manerud  (1913),  68  Oreg.  350,  S.  (6  Wall.)  231,  18  L.  ed.  783,  Me- 
136  Pae.  826,  Ann.  Cas.  1915  C  522 ;  ehein  's  Cas.  433,  Burd.  Cas.  388, 
Anderson  v.  Stayton  Bank  (1916),  Gilm.  Cas.  281. 

274 


NATURE  AND   EXTENT  OF  LIABILITY          [§§  310,311 

were  made  jointly  with  another  and  not  with  the  defendant 
alone — a  plea  which  would  be  without  meaning  if  the  copart- 
nership contract  was  the  several  contract  of  ea^h  copartner. ' ' 

§310.  Same  subject. — "The  general  doctrine  maintained  in 
England  and  the  United  States,"  continued  the  same  learned 
judge,  "may  be  briefly  stated.  A  judgment  against  one,  upon 
a  joint  contract  of  several  persons,  bars  an  action  against  the 
others,  though  the  latter  were  dormant  partners  of  the  defend- 
ant in  the  original  action  and  the  fact  was  unknown  to  the  plain- 
tiff when  that  action  was  commenced.  When  the  contract  is 
joint,  and  not  joint  and  several,  the  entire  cause  of  action  is 
merged  in  the  judgment.  The  joint  liability  of  the  parties  not 
sued  with  those  against  whom  the  judgment  is  recovered  being 
extinguished,  their  entire  liability  is  gone.  They  cannot  be  sued 
separately,  for  they  have  incurred  no  several  obligation;  they 
cannot  be  sued  jointly  with  the  others,  because  judgment  has 
been  already  recovered  against  the  latter,  who  would  otherwise 
be  subjected  to  two  suits  for  the  same  cause." 

This  rule,  however,  may  be  changed  by  a  statute  altering  the 
effect  of  the  judgment  as  to  the  defendants  who  were  not  per- 
sonally served  with  process,12  and  has  been  so  changed  in  sev- 
eral States. 

§311.  Same  subject — Release  of  one  releases  all. — Another 
consequence  of  the  joint  character  of  partnership  obligations 
is  the  rule  that  a  release  of  one  of  the  partners  releases  all.13 

12  Mason  v.   Eldred,  supra.     See,  ISLindley    on    Partnership     (7th 

also,  Brooks  v.  Mclntyre   (1856),  4  ed.),267;  Harbeck  v.  Pupin  (1895), 

Mich.      316;      Sugg      v.      Thornton  145  N.  Y.  70,  39  N.  E.  722;  Merritt 

(1889),  132  U.  S.  524,  10  Sup.  Ct.  v.    Bucknam    (1897),    90    Me.    146, 

163,  33  L.  ed.  447;  Barker  v.  Brink  37     Atl.     885;     Clark     v.     Mallory 

(1854),  24  N.  J.  L.  333;  Patten  v.  (1900)',  185  111.  227,  56  N.  E.  1099; 

Cunningham    (1885),   63    Tex.   666;  note,  138  Am.  St.  E.  834.     Thus  a 

Hall  v.  Lanning    (1875),  91   U.   S.  receipt  under  seal,  given  to  one  of 

160,  23  L.  ed.  271;  Wood  v.  Watkin-  two  or  more  joint  debtors,  "in  full 

son   (1846),  17  Conn.  500,  44  Am.  satisfaction  for  his  liability"  upon 

Dec.    562,   and   note;    Nathanson  v.  the   obligation,   imports  a  technical 

Spitz   (1895),  19  E.  I.  70,  31  Atl.  release,    and   therefore   releases    all. 

690,  Burd.  Gas.  393.  Hale  v.  Spaulding  (1888),  145  Mass. 

275 


§  312]  LAW   OP   PARTNERSHIP 

This  rule  applies,  however,  only  to  the  case  of  a  technical  re- 
lease under  seal,  and  does  not  extend  to  a  mere  covenant  not  to 
sue  one  partner,  or  to  any  other  instrument  reserving  the  cred- 
itor's rights  against  the  other  partners,  which,  though  in  the 
form  of  a  release,  may  be  treated  as  a  covenant  not  to  sue  rather 
than  as  an  absolute  release.14 

In  the  case  of  the  release,  however,  there  is  one  material  dis- 
tinction as  compared  with  the  taking  of  a  judgment.  If  the  ob- 
ligation be  joint,  the  release  of  one  releases  all  and  it  is  imma- 
terial that  the  obligation  was  also  several.  In  other  words,  the 
rule  applies  whether  the  obligation  be  simply  joint  or  joint  and 
several.15 

Statutes  in  a  number  of  States  now  permit  a  creditor  to  settle 
with  one  of  several  joint  debtors  without  losing  his  claim  against 
the  others  for  their  proportion.16 

§312.  Partnership  obligations  arising  from  tort  are  joint 
and  several. — The  liability,  however,  of  partners  for  torts 
committed  by  one  partner  or  by  the  servant  of  the  firm  is  joint 
and  several,  and  the  action  may  be  brought  against  one  or  all 

482,  14  N.  E.  534,  1  Am.  St.  E.  475,  treated  as  a  release,  it  is  not  so  in 

Meehem  's  Gas.  440.  the  case  of  a  covenant  not  to  sue  one 

Not  so,  where  one  released  was  an  of  several  debtors.     Here  the  cred- 

infant    who    claimed    exemption    on  itor  may   sue   all    (even  though   he 

that     ground.       Kirby     v.     Cannon  thereby  breaks  his  covenant  not  to 

(1857),  9  Ind.  371;   Young  v.  Cur-  sue  one  of  them  and  must  pay  him 

rier  (1885),  63  N.  H.  419.  damages  therefor,  which  usually  are 

14Lindley,    ubi    supra;    Hale    v.  nominal),  and   the   covenant   not  to 

Spaulding,  supra;  Benjamin  v.  Me-  sue  that  one  can  not  be  treated  as  a 

Connell  (1847),  4  Gilm.  (9  111.)  536,  release. 

46   Am.   Dec.   474;    Berry  v.    Gillis  15  See      Tuckerman     v.     Newhall 

(1845),   17  N.   H.   9,  43  Am.  Dec.  (1822), '  17  Mass.  581;  Benjamin  v. 

584;   Goodnow  v.  Smith    (1836),  18  McConnell,      supra;      Goodnow      v. 

Pick.  (Mass.)  414,  29  Am.  Dec.  600,  Smith,  supra;  Heckman  v.  Manning 

Meehem 's     Gas.     441;      Haney     v.  (1879),   4    Colo.    543;    Crawford   v. 

Creamery  Co.  (1899),  108  Iowa  313,  Roberts  (1880),  8  Oreg.  324. 

79  N.  W.  79.  16  See  Hall  v.  Lanning  (1875),  91 

While  a  covenant  not  to  sue,  in  TJ.  S.  160,  23  L.  ed.  271 ;  Northern 

the  case  of  a  single  debtor,  is  fre-  Ins.   Co.  v.   Potter    (1883),  63   Cal. 

quently,  to  avoid  circuity  of  action,  157,  Gilm.  Gas.  286. 

276 


NATURE  AND  EXTENT  OF  LIABILITY  [§  313 

or  an  intermediate  number.17    The  Uniform  Partnership  Act  is 
to  the  same  effect.18 

''To  this  general  rule,"  says  Mr.  Justice  Lindley,19  "an  ex- 
ception occurs  where  an  action  ex  delicto  is  brought  against  sev- 
eral persons  in  respect  of  their  ownership  in  land,  for  then  they 
are  liable  jointly,  and  not  jointly  and  severally."  But  this  ex- 
ception has,  as  to  partners,  been  modified  by  the  English  Part- 
nership Act.  A  release  of  one  of  several  joint  wrong  doers  or- 
dinarily releases  all.80 

II.   OF  THE  EXTENT  OF  PARTNERSHIP  LIABILITY. 

§313.  Each  partner  liable  in  solido  for  partnership  obliga- 
tions.— Although  the  obligation  of  partnership  liabilities  may 
be  in  nature  joint,  it  does  not  follow  that  the  liability  when 
once  judicially  established  must,  by  the  creditor,  be  jointly  or 
ratably  enforced  against  the  partners.  The  liability  may  be 
joint,  but  it  is  also  entire.  Each  partner,  therefore,  is  person- 
ally and  individually  liable  for  the  entire  amount  of  all  such 
obligations,  whether  arising  from  contract  or  tort,  as  are  bind- 
ing upon  the  firm.  His  liability,  in  ordinary  partnerships,  is 
not  limited  by  the  amount  of  his  contribution  to  the  partner- 
ship capital,  but  extends  to  his  entire  property;  and  it  makes 
no  difference  what  may  be  his  share  or  interest  in  the  partner- 
ship business,  or  whether  he  is  an  active  or  a  secret  partner,  or 
whether  the  other  partners  are  pecuniarily  responsible  or  not; 
he  is  liable  in  solido  for  the  partnership  obligations.21 

17 See  White  v.  Smith  (1860),  12  v.  Barnes   (1904),  117  Ky.  860,  79 

Rich.  (S.  C.)  L.  595,  Gilm.  Gas.  306;  S.  W.  261,  111  Am.  St.  R.  273,  and 

Howe  v.  Snaw  (1868),  56  Me.  291;  note,  25  Ky.  Law.  R.  2036,  64  L.  R. 

Roberts  v.  Johnson  (1874),  58  N.  Y.  A.  574. 

613.  21  See     Hallowell     v.     Blackstone 

18  Sec.  15  quoted  ante,  §308.  Nat.  Bank    (1891),  154  Mass.  359, 

19  Lindley    on     Partnership     (7th  28  N.  E.  281,  13  L.  R.  A.  315,  Burd. 
ed.),    320,    citing    1    Wms.    Saunds.  Cas.    288,    Gilm.    Gas.    309,    where 
291,  /  and  g.  under  "claims  against  him,"  it  was 

20  See  Abb  v.  Northern  Pac.  Ry.  held  that  firm  acceptances  were  to 
Co.   (1902),  28  Wash.  428,  68  Pac.  be  included. 

954,  92  Am.  St.  R.  864,  and  note,          In    tort,    see    Loomis    v.    Barker 
58  L.  R.  A.  293;  Louisville,  etc.,  Co.       (1873),  69  111.  360,  Gilm.  Cas.  308. 

277 


§  314]  LAW   OF   PARTNERSHIP 

§  314.  Individual  property  of  partner  may  be  taken  to  satisfy 
partnership  debt. — Moreover,  if  judgment  be  obtained  against 
the  partners  upon  an  obligation  existing  against  the  partner- 
ship, the  execution,  though  in  form  against  all,  may,  unless 
otherwise  provided  by  statute,  be  levied  directly  upon  the  indi- 
vidual property  of  any  one  or  more  of  the  partners  without  re- 
garding or  exhausting  the  firm  property.  The  creditor,  further, 
is  under  no  obligation  to  levy  against  all  the  partners  ratably, 
but  may  select  any  one  or  more  and  levy  execution  against  him 
or  them  until  the  judgment  is  satisfied,  leaving  all  questions  of 
contribution  to  be  settled  afterwards  between  the  partners  them- 
selves.22 In  case  any  partner  is  not  served  with  process,  no  per- 
sonal judgment  can  ordinarily  be  rendered  against  him,  nor 
can  his  individual  property  usually  be  taken,  though  the  firm 
property  may  be  seized.23  Where,  as  in  some  States,  an  action 
may  be  brought  against  the  firm  as  an  entity,  and  is  so  brought, 
a  similar  result  would  usually  follow.24 

If  conflict  arises  between  the  firm  creditors  and  the  individual 
creditors  of  the  partner,  as  to  the  application  of  the  individual 
property  of  a  partner,  special  rules  apply  which  will  be>  here- 
after considered  when  the  general  subject  of  the  application 
of  assets  to  the  claims  of  creditors  is  discussed.25 

22  See    Stevens   v.    Perry    (1873),  Lead  (1834),  14  N.  J.  L.  402,  Burd. 

113    Mass.    380,    Mechem   Gas.    961,  Gas.  285. 

Ames'    Gas.    330,    Burd.    Gas.    377;  23  See  Sugg  v.   Thornton   (1889), 

Randolph  v.  Daly   (1863),  16  N.  J.  132  U.  S.  524,  10  Sup.  Ct.  163,  33 

Eq.    313;    Clayton   v.   May    (1881),  L.  ed.  447;  Hall  v.  Lanning  (1875), 

68  Ga.  27;   Stout  v.  Baker  (1884),  91  U.  S.  160,  23  L.  ed.  271;  Brooks 

32  Kan.  113,  4  Pac.  141;  Haralson  v.   Mclntyre    (1856),  4  Mich.   316; 

v.    Campbell    (1879),    63    Ala.    278,  Yerkes    v.    McFadden    (1894),    141 

Mechem 's  Gas.  430.     But  in  Jaffray  N.  Y.   136,  36  N.  E.  7,  344,  Burd. 

v.  Jennings   (1894),  101  Mich.  515,  Gas.  382. 

60    N.    W.    52,    25    L.    E.    A.    645,  See,  also,  People's  Nat.  Bank  v. 

Mechem 's  Gas.  416,  Burd.  Gas.  378,  Hall    (1904),    76   Vt.   280,   56   Atl. 

Gilm.  Cas.  503,  it  is  held  that  the  1012. 

individual  property  of  an   innocent  24  So  held,  for  example,  in  Iowa, 

partner  is  not  liable  to  attachment  See    Lansing    v.    Bever    Land    Co. 

for    a   firm    debt   fraudulently    con-  (1913),  158  Iowa  693,  138  N.  W. 

tracted  by  another  member   of  the  833  citing  other  Iowa  case, 

firm.     See  also,  Curtis  v.  Hollings-  25  See  post,  Ch.  XX. 

278 


NATURE  AND  EXTENT  OF  LIABILITY          [§§  315,316 

§315.  Partner  paying  debt  may  have  contribution. — Where 
one  partner  is  thus  compelled  to  pay  or  satisfy  the  whole  of  a 
partnership  debt,  he  has  a  remedy,  usually  upon  an  accounting 
in  equity,26  to  require  the  other  partners  to  contribute  their  pro 
rata  shares.  For  though  each  partner  as  to  third  persons  is 
liable  for  all  the  partnership  debts,  yet  as  between  themselves 
each  partner  is  liable  only  for  his  own  share.  And  even  as  to 
third  persons,  though  each  is  liable  for  all  the  debts  of  the  firm, 
yet  his  liability  is  sometimes  said  to  be  as  a  principal  debtor 
for  his  own  share,  and  as  a  surety  for  the  other  partners  for  the 
remainder. 

§  316.  Exemptions  from  execution  on  partnership  property. 

— The  present  seems  an  appropriate  place  to  mention  the  ques- 
tion of  the  right  of  the  firm  or  of  one  partner  to  claim  the  or- 
dinary statutory  exemptions  of  certain  amounts  from  execution, 
provided  for  debtors  generally,  when  an  execution  is  levied  upon 
the  partnership  property.  The  authorities  are  very  much  in 
conflict,  but  the  clear  weight  of  authority  is  to  the  effect  that, 
during  the  continuance  of  the  partnership,  neither  the  firm  nor 
the  partner  can  claim  such  exemptions.27  That  is  to  say,  the 
firm  as  an  entity  can  not  claim  it,  and  the  individual  partners 

26  See  ante,  §  190.  (1896),  8  N.  Mex.  622,  45  Pac.  1122, 

27 See  Jensen  v.  Wiersma  (1919),  34  L.  E.  A.  604;    Green  v.  Taylor 

-  Iowa  — ,  170  N.  W.  780,  4  A.  L.  (1895),   98   Ky.    330,    17   Ky.   Law 

E.  298,  with  elaborate  note;  Cowan  E.  897,  32  S.  W.  945,  56  Am.  St. 

v.  Creditors  (1888),  77  Gal.  403,  19  B.  375,  Burd  Gas.  113;  Aultman  v. 

Pae.  755,  11  Am.  St.  Eep.  294,  and  Wilson    (1896),    55  'Ohio    St.    138, 

cases    cited;     Thurlow    v.     Warren  44  N.  E.  1092,  60  Am.  St,  E.  677, 

(1889),    82    Me.    164,    19    Atl.    158,  Burd.     Cas.    448;     Hart    v.    Hiatt 

17    Am.    St.    Eep.    472;    Aiken    v.  (1899),    2    Indian   Ter.   245,   48   S. 

Steiner  (1892),  98  Ala.  355,  13  So.  W.  1038,  Gilm.  Cas.  567;   Porch  v. 

510,   39   Am.   St.  Eep.  58;    Pond  v;  Arkansas    Milling    Co.     (1898),    65 

Kimball     (1869),    101    Mass.    105,  Ark.  40,  45  S.  W.  51,  67  Am.  St. 

Burd.  Cas.  186;  Prosser  v.  Hartley  E.  895;  Eichardson  v.  Eedd  (1896), 

(1886),  35  Minn.  340,  29  N.W.  156;  118    N.    Car.    677,    24    S.    E.    420; 

Goudy   v.   Werbe    (1888),   117  Ind.  Miller  v.  Waite  (1899),  59  Neb.  319, 

154,  19  N.  E.  764,  3  L.  E.  A.  114;  80  N.  W.  907,  affd.  60  Neb.  431,  83 

Peaslee   v.    Sanborn    (1895),   68   N.  N.  W.  355 ;  First  Nat.  Bank  v.  Frost 

H.   262,   44   AtL    384;    In   re   Spitz  (1884),  61  Wis.  335,  21  N.  W.  280. 

279 


§316] 


LAW   OF   PARTNERSHIP 


collectively  or  singly  can  not  claim  it  in  the  partnership  prop- 
erty. Since  every  partner  has  a  right  to  have  all  of  the  part- 
nership property  applied  first  to  the  payment  of  the  partner- 
ship debts,  no  single  partner,  without  his  copartners'  consent 
at  least,  could  claim  any  personal  exemption  in  the  partnership 
property  which  would  interfere  with  such  application.28  After 
the  partnership's  affairs  are  wound  up  and  each  partner's  re- 
siduary interest  is  segregated,  there  could  be  no  objection  to  his 
claiming  individual  exemptions  in  that  as  against  his  individual 
creditors.29  In  Michigan,  Georgia,  North  Carolina  and  New 
York  and  perhaps  some  other  States  somewhat  different  rules 
have  been  laid  down.80 

The  Uniform  Partnership  Act  is  non-committal  upon  the 
subject  of  the  partner's  individual  exemption,31  but  it  express- 
ly declares  that  "when  partnership  property  is  attached  for  a 
partnership  debt  the  partners  or  any  of  them  or  the  representa- 
tives of  a  deceased  partner  cannot  claim  any  right  under  the 
homestead  or  exemption  laws. ' ' 32 


2*  See  Richardson  v.  Ecdd,  supra. 
May  with  consent  of  all,  O 'Gorman 
v.  Fink  (1884),  57  Wis.  649,  15  N. 
W.  771,  46  Am.  Eep.  58;  Lee  v. 
Bradley  (1902),  44  Fla.  787,  33  So. 
456.  Bed  quaere,  see  Wills  v.  Downs 
(1890),  38  111.  App.  269. 

29  See  Aiken  v.  Steiner,  supra. 
Farmer's  Union  Co.  v.  Seitz  (1910), 
93  Ark.  329,  124  S.  W.  780;  South- 
ern Coal  Co.  v.  Smith  (1899),  105 
Ky.  769,  49  S.  W.  807,  20  Ky.  Law 
R.  1594;  Moyer  v.  Drummond 
(1889),  32  S.  Car.  165,  10  S.  E. 
952,  17  Am.  St.  R.  850,  7  L.  R.  A. 
747;  Goudy  v.  Werbe,  supra;  Dennis 
v.  Kass,  (1895),  11  Wash.  353,  39 
Pac.  656,  48  Am.  St.  R.  880. 

30 See  McCoy  v.  Brennan  (1886), 
61  Mich.  362,  28  N.  W.  129,  1  Am. 
St.  Rep.  589  (each  partner  may 
claim  it  as  against  a  firm  creditor) ; 
Blanchard  v.  Pascal  (1881),  68  Ga. 


32,  45  Am.  Rep.  474  (same  effect) ; 
Evans  v.  Bryan  (1886),  95  N.  C. 
174,  59  Am.  Rep.  233  (allowed  to 
partner  individually  when  pursued 
by  his  partner  as  an  individual 
creditor) ;  Stewart  v.  Brown  (1867), 
37  N.  Y.  350,  93kAm.  Dec.  578 
(partners  may  claim  it  where  it 
would  have  been  allowed  to  an  indi- 
vidual debtor) ;  St.  Louis,  etc.,  Co. 
v.  International,  etc.,  Co.  (1889), 
74  Tex.  651,  12  S.  W.  842,  15  Am. 
St.  R.  870. 

31  Sec.  28,  (3)  provides,  "Nothing 
in  this  act  shall  be  held  to  deprive 
a  partner  of  his  right,  if  any,  under 
the  exemption  laws,  as  regards  his 
interest  in  the  partnership."     From 
its  location,  this  provision  seems  to 
have  in  mind  granting  him  his  ex- 
emption when  his  separate  interest 
is  pursued  by  his  individual  creditor. 

32  Sec.  25  (c). 


280 


NATURE  AND  EXTENT  OF  LIABILITY         [§§  317,318 

III.   OP  THE  BEGINNING  AND  ENDING  OF  LIABILITY. 

§  317.  In  general. — The  liability  of  the  partner  is  based  upon 
the  theory  that  he  was  a  principal  in  the  business  in  which  the 
obligation  was  incurred.  It  often  becomes  material,  therefore, 
to  determine  when  he  became  or  ceased  to  be  a  partner,  and 
whether  he  was  such  at  the  time  the  disputed  liability  arose. 
He  may  contend  that  the  obligation  was  incurred  before  he  be- 
came a  partner ;  or  that  it  arose  after  he  had  ceased  to  be  such. 
Where  the  question  is  whether  any  partnership  at  all  had  then 
been  organized,  the  question  will  be  governed  by  principles  al- 
ready referred  to.  If  the  question  is  whether  all  partnership 
relations  have  ceased,  considerations  hereafter  to  be  mentioned 
will  control.  But  a  person  may  be  admitted  as  a  partner  to  a 
firm  already  existing,  or  he  may  retire  from  a  firm  which  there- 
after continues  business,  and  his  liability  in  either  case  requires 
some  special  consideration. 

§318.  Of  an  incoming  partner — Under  the  common  law. — 

A  person  who  enters  a  previously  existing  firm  is  often  called 
an  incoming  partner.  The  admission  of  a  new  partner  really 
constitutes  in  law  a  dissolution  of  the  old  and  the  creation  of 
a  new  partnership,33  though  in  actual  practice  it  is  often  not  so 
regarded,  the  firm  by  consent  being  treated  as  continuing,  not- 
withstanding the  change  in  membership. 

An  incoming  partner  is  not,  by  the  common  law,  liable  for 
the  previously  contracted  obligations  of  the  firm  to  which  he  is 
thus  admitted,  unless  by  special  agreement  he  has  assumed  such 
a  liability,  or  has  so  conducted  himself  as  to  raise  a  presump- 
tion of  such  an  agreement.34  He  acquires  also  no  greater  in- 

33  See  Hatehett  v.  Blanton  (1882),  Ark.  457,  5  S.  W.  787;   Frazer  v. 

72  Ala.  423;  Freeman  v.  Huttig  Co.  Howe    (1883),   106  111.  563    (where 

(1913),    105    Tex.    560,    153    S.   W.  widow     took     deceased     husband's 

122,  Ann.  Cas.  1916  E,  446.  place    in    firm) ;    Lucas    v.    Coulter 

Can  only  be  introduced  with  the  (1885),  104  Ind.  81,  3  N.  E.  622. 

consent    of   all;    one   partner   alone  Where  new  partner  is  added  to  an 

cannot  take  in  a  new  partner;  Love  existing  firm,  it  is  really  the  crea- 

v.  Payne  (1880),  73  Ind.  80,  38  Am.  tion  of  a  new  partnership  and  the 

Eep.  111.  new  partner  requires  no  interest  in 

24  See  Ringo  v.  Wing  (1887),  49  the   assets   of   the   former   partner- 

281 


319] 


LAW   OF   PARTNERSHIP 


terest  in  the  property  of  the  former  partnership  than  the  agree- 
ment which  provides  for  his  admission  may  confer  upon  him. 
The  same  agreement  will  also,  ordinarily,  prescribe  the  propor- 
tion of  the  existing  obligations  which  he  is  to  assume.85  This 
proportion  will  usually  be  the  same  as  that  of  the  interest  ac- 
quired, but  it  is  not  necessarily  the  same.  His  rights  of  action 
on  existing  obligations  due  to  the  firm  into  which  he  enters  would 
usually  be  those  of  a  mere  assignee.86 

§319 No  rule  of  partnership  or  of  agency,  of  course, 

can  alone  make  an  incoming  partner  liable  for  the  obligations 
incurred  before  he  became  actually  or  ostensibly  a  member  of 
the  firm.  He  must  in  some  form  assume  the  liability,  if  he  is  to 
be  liable  at  all.37  His  agreement  to  make  himself  responsible 
must  have  a  consideration,38  and  it  must  be  one  available  to  the 


ship  and  assumes  no  liability  for  its 
debts  unless  there  is  an  agreement 
to  that  effect:  Hatchett  v.  Blanton, 
supra.  Not  liable  unless  he  agreed 
to.be;  Babcock  v.  Stewart  (1868), 
58  Pa.  179.  No  presumption  of 
such  an  agreement;  it  must  be 
shown:  Kountz  v.  Holthouse  (1877), 
85  Pa.  235;  Bracken  v.  Dillon 
(1879),  64  Ga.  243,  37  Am.  Kep. 
70;  Peyser  v.  Myers  (1892),  135  N. 
Y.  599,  32  N.  E.  699;  Peters  v. 
McWilliams  (1884),  78  Va.  567; 
Wolff  v.  Madden  (1893),  6  Wash. 
514,  33  Pac.  975,  Gilm.  Cas.  325;  that 
a  particular  debt  was  among  those 
assumed  may  appear  from  conduct 
and  circumstances:  Flour  City  Bank 
v.  Widener  (1900),  163  N.  Y.  276,  57 
N.  E.  471;  Peyser  v.  Myers,  supra. 
If  certain  enumerated  debts  are 
assumed,  he  is  not  liable  for  others; 
McGilvery  v.  McGilvery  (1912),  23 
Idaho  116,  128  Pac.  978. 

35  See      Serviss      v.      McDonnell 
(1887),   107   N.   Y.   260,   14   N.   E. 
314. 

36  See  post  §  325. 


37  Courts  sometimes  infer  an  as- 
sumption   from    rather    slight    evi- 
dence.      See     Wood     v,     Macafee 
(1918),  172  N.  Y.  Supp.  703,  citing 
many   eases.     Especially  where   the 
new  firm  takes  the  old  firm's  prop- 
erty;   Shaw   v.    McGregory    (1870), 
105  Mass.  96.    In  Cross  v.  National 
Bank    (1876),   17   Kan.   336,   Gilm. 
Cas.  326,  the  court  says:     "While 
an  incoming  partner  does  not  by  the 
mere   fact   of  joining   the   firm  be- 
come liable  for  its  prior  debts,  yet 
he  may  assume  such  liability,  and  it 
is  a  question  in  fact  whether  he  did 
so.     And  very  slight  testimony,  the 
books  say,  will  be  sufficient  to  show 
he   did,"   citing  Ex  parte   Jackson 
(1790),  1  Ves.  131;  Updike  v.  Doyle 
(1863),  7  E.  I.  446,  and  other  cases. 

38  Must  be  consideration;  Bracken 
v.  Dillon,  supra;  Rohlfing  v.  Carper 
(1894),  53  Kan.  251,  36  Pac.  336. 

The  interest  acquired  in  the  prop- 
erty-may be  a  sufficient  considera- 
tion; Eohlfing  v.  Carper,  supra. 

New  partner  bound  by  note  given 
by  new  firm  in  consummation  of 


282 


NATURE  AND  EXTENT  OF  LIABILITY 


[§319 


party  who  seeks  to  enforce  it.  It  may  be  an  agreement  with 
the  other  partners  only  and  which  they  only  can  enforce,38  or 
it  may  be  an  agreement  which,  if  not  actually  made  with  the 
creditors,  or  to  which  they  become  parties  by  an  express  or  an 
implied  novation,40  is  yet  one  so  far  made  for  the  benefit  of  the 
creditors  that  they  may  enforce  it  in  those  jurisdictions  which 
permit  the  beneficiary  to  sue  at  law.41  The  consideration  may 
move  from  the  creditors:  in  the  ordinary  case,  however,  it  does 
not,  and  the  creditors  are  merely  the  beneficiaries  of  the  agree- 
ment between  the  old  partners  and  the  new  one.  As  will  be  seen, 
the  fact  that  a  new  firm  or  a  new  partner  assumes  the  debts  of 
the  old  one  does  not  of  itself  release  the  liability  of  the  old  one 
to  the  creditor  unless  he  consents  to  the  change. 

Where,  at  the  same  time  that  a  new  partner  comes  in  a  previ- 
ous one  also  retires,  there  are  additional  questions,  some  of  which 


dealings  with  old,  though  creditor 
did  not  know  of  the  new  partner: 
Kearney  v.  Snodgrass  (1885),  12 
Ore.  311,  7  Pae.  309. 

As  to  whether  such  undertaking 
is  a  promise  to  pay  the  debt  of 
another  within  the  Statute  of 
Frauds,  see  Bracken  v.  Dillon,  supra; 
Spann  v.  Cochran  (1885),  63  Tex. 
240;  Townsend  v.  Long  (1874),  77 
Pa.  143,  18  Am.  Eep.  438. 

39  In  New  York,  notwithstanding 
Lawrence  v.  Fox,  it  is  held  that  an 
incoming   partner   who    agrees   that 
the  new  firm  shall  pay  the  debts  of 
the  old,  is  liable  to  the  old  firm  only 
and  not  the  creditors  of  that  firm: 
Wheat  v.  Eice  (1884),  97  N.  Y.  296; 
Serviss    v.    McDonnell    (1887),    107 
N.  Y.  260,  14  N.  E.  314;   see  also 
Ayers   v.   Gallup    (1880),   44   Mich. 
13,  5  N.  W.  1072;   Hicks  v.  Wyatt 
(1861),  23  Ark.  56,  Gilm.  Cas.  328. 

40  If  the  creditor  is  informed  and 
expressly  or  by  implication  consents 
there  may  be  found  to  be  a  nova- 
tion, post,  §  429. 


41  That  the  creditor  may  sue  on 
the  agreement  to  assume  and  pay, 
see  Maxfield  v.  Schwartz  (1890),  43 
Minn.  221,  45  N.  W.  429;  Dodge 
v.  Cutrer  (1911),  100  Miss.  647,  56 
So.  455;  Poole  v.  Hintrager  (1882), 
60  Iowa  180,  14  N.  W.  223;  Han- 
nigan  v.  Allen  (1891),  127  N.  Y. 
639,  27  N.  E.  402;  Arnold  v.  Nichols 
(1876),  64  N.  Y.  117,  Gilm.  Cas. 
328;  Ellis  v.  Harrison  (1891),  104 
Mo.  270,  16  S.  W.  198;  Shamp  v. 
Meyer  (1886),  20  Neb.  223,  29  N. 
W.  379;  Merriman  v.  Mfg.  Co. 
(1878),  12  E.  I.  175;  Blake  v.  At- 
lantic Bank  (1913),  33  E.  I.  464, 
82  Atl.  225,  39  L.  E.  A.  (N.  S.) 
874;  Spana  v.  Cochran  (1885),  63 
Tex.  240;  Townsend  v.  Long  (1874), 
77  Pa.  143,  18  Am.  Eep.  438;  White 
v.  Thielens  (1884),  106  Pa.  173; 
Adams  v.  Kuehn  (1888),  119  Pa. 
76,  13  Atl.  184.  Contra:  Morgan  v. 
Eandolph  (1900),  73  Conn.  396,  47 
Atl.  658,  51  L.  E.  A.  653 ;  Ayres  v. 
Gallup  (1880),  44  Mich.  13,  5  IT. 
W.  1072. 


283 


§§  320,  321]  LAW   OB'  PARTNERSHIP 

are  touched  in  the  following  sections  dealing  with  an  outgoing 
partner. 

§320.  Under  the  Uniform  Partnership  Act,— The  Uni- 
form Partnership  Act  proposes  a  radical  change  in  the  existing 
law.  It  provides  that  "A  person  admitted  as  a  partner  into 
an  existing  partnership  is  liable  for  all  the  obligations  of  the 
partnership  before  his  admission  as  though  he  had  been  a  part- 
ner when  such  obligations  were  incurred,  except  that  this  liabil- 
ity shall  be  satisfied  only  out  of  partnership  property."42  It 
will  be  observed  that  this  does  not,  like  the  contractual  assump- 
tion, impose  upon  the  incoming  partner  a  general  and  individual 
liability  which  could  be  satisfied  out  of  his  separate  estate.  It 
presumptively  does  not  preclude  a  contractual  assumption  with 
its  ordinary  consequences.  The  purpose  of  the  provision  is  to 
enable  the  creditors  of  the  first  firm  more  effectually  to  secure 
payment  out  of  its  assets  notwithstanding  their  transfer  to  the 
succeeding  firm.43 

§  321.  Of  an  outgoing  partner. — A  person  who  retires  from 
a  firm  wlych  thereafter  continues  is  said  to  be  an  outgoing  or  re- 
tiring partner.  His  withdrawal  is,  of  course,  in  law  ordinarily 
a  dissolution  of  the  firm, — though  in  practice  the  firm  is  fre- 
quently spoken  of  as  continuing, — and  his  liability  for  future 
acts  is  governed  by  the  general  rules  governing  dissolution.  He 
is,  as  will  be  seen,44  in  general  liable  for  acts  done  until  he  has 
not  only  withdrawn  from  the  firm  but  has  also  given  due  notice 
of  his  withdrawal.46 

His  liability  to  creditors  for  the  existing  debts  and  obliga- 
tions of  the  partnership  is,  of  course,  not  terminated  by  his 
withdrawal,  but  continues  with  all  of  the  ordinary  incidents, 
such  as  liability  to  action,  joinder  as  a  party,  and  the  like,  until 
he  has  in  some  way  been  discharged.  No  arrangement  made 
between  the  continuing  partners  and  himself  can,  of  itself,  re- 

42  Sec.  17.     The  same  provision  is          43  See  post,  §  462. 
repeated,    in    slightly   different    Ian-  44  See  post,  §  398. 

guage,  in  section  41  of  the  act.  45  See  post,  §§387-397, 

234 


NATURE  AND  EXTENT  OP  LIABILITY 


[§322 


lease  him  from  his  liability  to  the  existing  creditors  unless  the 
latter  in  some  way  assent  to  it,  although,  as  will  be  seen,  such 
arrangements  are  sometimes  held  to  create  a  relation  of  prin- 
cipal and  surety  between  the  continuing  and  the  retiring  part- 
ners, which,  when  brought  to  the  attention  of  the  creditor,  he 
may  not  ignore.46  The  creditor  may  also,  as  will  be  seen,  ex- 
pressly or  tacitly  so  assent  to  the  arrangement  as  to  work  a  no- 
vation and  the  consequent  release  of  the  outgoing  partner.47 

§  322.  The  outgoing  partner  whom  the  continuing  part- 
ners have  undertaken  to  protect  has  his  remedy  against  them 
according  to  the  nature  of  their  undertaking.48  If  their  agree- 
ment was  to  pay  the  debts  when  due,  there  will  be  a  breach  of 
that  agreement  if  they  fail  to  do  so,  even  though  the  outgoing 
partner  has  not  paid  or  been  compelled  to  pay  the  debts  him- 
self. That  fact  affects  only  the  measure  of  damages,  not  the 


46  See  post,  §  428. 

47  See  post,  §  429. 

48  See   Meyer  v.   Parsons    (1900), 
129    Cal.    653,    62   Pac.    216;    Alex- 
ander v.  McPeck  (1904),  189  Mass. 
34,  75  N.  E.  88;   Eobinson  v.  Eoos 
(1891),  138  111.  550,  28  N.  E.  821; 
Griffin  v.  Oman  (1860),  9  Fla.  22; 
Berridge    v.     Slawson     (1893),    94 
Mich.  484,  54  N.  W.  278;   Button 
v.  Dunn    (1866),  54  Me.   152;   Ed- 
wards v.  Kemington  (1881),  51  Wis. 
336,   8   N.   W.   193,  Mechem's  Gas. 
907. 

Where  one  partner  sells  out  to  a 
third  person,  who  agrees  to  assume 
his  share  of  the  debts,  and  the  pur- 
chaser and  the  other  partner  form 
a  new  partnership  and  continue  the 
business,  there  is  held  to  be  an  im- 
plied undertaking  on  the  part  of  the 
continuing  partner  to  save  the  re- 
tiring partner  harmless  to  the  extent 
of  the  assets  only  and  not  absolute- 
ly: Peyton  v.  Lewis  (1851),  51  Ky. 
(12  B.  Mon.)  356,  Mechem's  Gas. 


1028.  Compare  La  Montagne  v. 
Bank  of  N.  Y.  (1905),  183  N.  Y. 
173,  76  N.  E.  33;  Sheppard  v. 
Bridges  (1911),  137  Ga.  615,  74  S. 
E.  245. 

Retired  partners  held  not  liable  to 
contribute  to  the  members  of  the 
continuing  partnership  who  have 
paid  the  existing  debts;  Savage  v. 
Putnam  (1865),  32  N.  Y.  501. 

In  a  joint  stock  company  or  part- 
nership with  transferable  shares, 
members  who  retire  leaving  the  as- 
sets and  business  to  the  others  and 
their  successors  are  held  entitled  to 
be  indemnified  by  the  latter  against 
the  existing  debts:  Tyrell  v.  Wash- 
burn  (1863),  88  Mass.  (6  Allen) 
466. 

Where  partner  sells  out  to  his  co- 
partners who  continue  the  business, 
held  knplied  agreement  on  their  part 
to  indemnify  him  against  existing 
debts:  Gobb  v.  Benedict  (1900),  27 
Colo.  342,  62  Pac.  222,  Mechem's 
Gas.  557. 


285 


§  322]  DAW  OP  PARTNERSHIP 

breach.  If  the  agreement  were  to  indemnify  him  against  loss, 
he  ordinarily  could  not  complain  until  he  had  paid  or  been 
compelled  to  pay  the  debts  or  any  of  them.  He  would  have  an 
action  at  law  for  damages,  or,  in  many  cases,  in  equity  to  com- 
pel performance  of  the  agreement  to  indemnify. 


288 


CHAPTER  XIV. 


OF  ACTIONS  BY  AND  AGAINST   THE  PARTNERSHIP. 


§  323.  In  general. 

I.  PARTIES  TO  ACTIONS  BY  THE 
PARTNEESHIP. 

324.  Who  should  sue  in  actions  by 
the  firm. 

1.  In  Contract. 

325, 326.  a.  Contracts      made      in 
firm  name. 

327.  6.  Contracts  made  in  name  of 

one  partner  for  the  firm. 

328.  Actions     cannot     usually    be 

brought  in  firm  name. 

329.  One  suing  for  all  where  part- 

ners are  very  numerous. 

2.  In  Tort. 

330.  All    partners    must    sue    for 

torts  affecting  firm. 

3.  Effect   of  Personal  Disability. 

331.  Effect    of    disability    of    one 

partner — Recovering  prop- 
erty wrongfully  disposed  of 
by  him. 

II.  PARTIES  TO  ACTIONS  AGAINST 
THE  PARTNERSHIP. 

332.  Who  should  be  sued  in  actions 

against   the   firm. 


§323.  In  general. — The  general  subject  of  actions  by  and 
against  the  partnership  obviously  suggests  a  great  variety  of 
questions,  such  as  process,  parties,  pleading,  evidence,  defences, 
and  the  like,  many  of  which  are  too  extensive  or  technical  for 
consideration  in  such  a  book  as  this.  The  question,  however,  of 

287 


1.  In  Contract. 

§  333.  All     actual     and     ostensible 
partners  should  be  joined. 

334.  How  when  contract  made 

in  name  of  one  partner. 

335.  Dormant  and  secret  partners 

proper    but    not    necessary 
parties. 

336.  Nominal  partners. 

337.'  Firm  as  such  not  to  be  sued 
except  by  statute. 

2.  In   Tort. 

338.  Actions     of     tort     may     be 

brought  against  all  or  any 
of  the  partners. 

339.  No  action  against  firm  except 

by  statute. 

III.  SET  OFF  IN   ACTIONS  BY  AND 

AGAINST  THE  PARTNERSHIP. 

340.  Set    off    of    individual    and 

partnership  claims. 

341.  Under  statutes. 

342.  In  equity. 


§§  324,  325]  LAW  OF  PARTNERSHIP 

who  are  the  proper  parties  to  such  actions  is  one  of  rather  funda- 
mental interest,  and  so  are  some  matters  of  defense  like  set-off, 
and  to  these  subjects  this  chapter  will  be  chiefly  confined.  The 
question  of  who  should  be  the  parties  to  actions  by  the  partner- 
ship involves  somewhat  different  considerations  from  those 
raised  when  the  action  is  against  the  partnership.  Each  sub- 
ject will  therefore  be  separately  considered.  What  is  here  said 
has  reference  to  actions  brought  during  the  continuance  of  the 
partnership.  The  rules  applicable  where  the  partnership  is  dis- 
solved by  death  or  otherwise  will  be  considered  later  when  deal- 
ing with  the  effect  of  dissolution.1 

I.  PARTIES  TO  ACTIONS  BY  THE  PARTNERSHIP. 

§  324.  Who  should  sue  in  actions  by  the  firm. — The  question 
who  should  join  as  parties  plaintiff  may  arise  when  the  action 
is  (1)  in  contract,  or  (2)  in  tort.  In  the  former  case  the  con- 
tract may  have  been  made  (a)  in  the  name  of  the  firm,  or  (&) 
in  the  name  of  one  partner  for  the  benefit  of  the  firm. 

1.    In  Contract. 

§  325.  a.  Contracts  made  in  firm  name. — In  actions  upon  con- 
tracts made  in  the  name  of  the  firm,  the  action  should  be  brought 
in  the  individual  names  of  all  the  persons  who  were  the  actual 
and  ostensible  partners  at  the  time  the  debt  or  contract  sued 
upon  was  made  or  incurred.  If  some  of  those  partners  have 
since  retired  from  the  firm,  the  action  must  still  be  in  the  names 
of  those  who  were  the  partners  at  the  time,  and  cannot  be  main- 
tained in  the  names  of  the  present  partners,  except  in  those 
cases  in  which  the  outgoing  partners  have  assigned  their  inter- 
ests to  the  remaining  partners,  and  the  statutes  permit  such  as- 
signees to  sue  in  their  own  names,  or  in  which  there  has  been  a 
promise  to  pay  to  the  new  firm. 

If  one  has  been  admitted  as  a  partner  who  was  not  such  at 
the  time  the  contract  was  made,  he  cannot  join  in  the  action, 
although  it  were  agreed  as  between  the  partners  themselves  that 
he  should  become  equally  interested  with  the  others  in  all  the 

1  See  post,  §  402  et  $eq, 

288 


[§326 


existing  property  and  rights  of  the  firm, — unless  he  may  sue  as 
an  assignee,  or  unless,  after  the  accession  of  the  incoming  part- 
ner, there  has  been  a  new  and  binding  promise  to  pay  the  firm 
as  newly  constituted.2  Dormant  partners  are  admissible  but 
not  indispensable  parties.8  Nominal  partners  need  not  be  joined 
unless  they  have  been  expressly  named  in  the  contract,4  but  it 
is  not  improper  to  join  them.6  These  rules  seem  not  to  be 
changed  by  the  codes  of  procedure. 

§326.  Same  subject. — The  mere  fact  that  the  partnership 
has  since  been  dissolved  does  not  ordinarily  change  the  rule  re- 
quiring joinder.6  If  the  partnership  was  dissolved  by  the  death 
of  a  partner,  then,  as  will  be  seen,  the  surviving  partner  or 
partners  will  sue  "as  survivors  of"  themselves  and  the  deceased 
partner.7  If  dissolved  by  the  assignment  of  one  partner's  in- 


2  See  Fireman's  Ins.  Co.  v.  Floss 
(1887),   67   Md.   403,   10   Atl.   139, 

I  Am.  St.  Eep.  398. 

3  See  Wood  v.  O 'Kelly  (1851),  8 
Cush.  (Mass.)  406;  Hilliker  v.  Loop 
(1833),    5    Vt.    116,    26    Am.    Dec. 
286;    Waite   v.   Dodge    (1861),    34 
Vt.   181;   Monroe  v.   Ezzel   (1847), 

II  Ala.  603;   Seymour  v.  Eailroad 
Co.   (1882),  106  U.  S.  320. 

Where  K  alone  carries  on  business 
in  name  of  K.  &  Son,  he  may  sue 
alone  to  recover  for  services  render- 
ed: Kell  v.  Nainby  (1829),  10  B.  & 
C.  20,  5  M.  &  R.  76;  Lasher  v. 
Colton  (1907),  225  111.  234,  80  N. 
E.  122,  8  A.  &  E.  Ann.  Gas.  367; 
Bishop  v.  Hall  (1857),  75  Mass. 
(9  Gray)  430. 

If  the  dormant  partner  joins, 
defendant  will  not  thereby  be  de- 
prived of  defenses  which  he  had  ac- 
quired against  the  ostensible  part- 
ners only  before  he  knew  of  the 
others:  Hilliken  v.  Loop,  supra. 

4  See  Guidon  v.  Robson  (1809),  2 
Camp.   302;    Enix  v.   Hays    (1878), 

Mech.  Part.— 19  289 


48  Iowa  86.  (Here  J,  who  was  really 
the  sole  owner,  sues  alone  to  recover 
the  price  of  cattle  sold  by  him  to 
defendant:  defendant  cannot  insist 
upon  the  joinder  of  P,  alleged  by 
him  to  be  a  nominal  partner  with 
J;  nor  can  he  set  off  against  J,  a 
claim  really  against  P  only,  even 
though  when  he  acquired  it  he  er- 
roneously thought  it  was  against  J 
and  P.) 

G'See  Jones  v.  Howard  (1876),  53 
Miss.  707;  Waite  v.  Dodge  (1861), 
34  Vt.  181.  Where  three  persons 
were  doing  business  as  partners  but 
two  of  them  were  nominal  only,  in 
an  action  by  the  three  on  a  note, 
payable  to  them  in  their  firm  name, 
defendant  not  permitted  to  set  off  a 
claim  which  he  holds  against  the 
third  (and  real  owner)  only:  Jones 
v  Howard,  supra. 

6  See  Fish   v.   Gates    (1882),  133 
Mass.     441;     Hyde    v.     Moxie     Co. 
(1894),    160    Mass.   559,    36  N.    E. 
585. 

7  See  post,  §§402,  403. 


§  327]  LAW  OP  PARTNERSHIP 

terest,  the  action  will  be  in  the  names  of  the  remaining  partner 
and  the  assignor  for  the  benefit  of  the  assignee,  except  in  juris- 
dictions where  an  assignee  may  sue  in  his  own  .name ; 8  if  dis- 
solved by  bankruptcy  of  one  partner,  the  solvent  partner  and 
the  assignee  would  sue  under  former  Acts,9  though  under  the 
entity  theory  of  the  present  Act  the  rule  may  be  different  as  to 
the  assignee.10  On  partnership  claims  assigned  by  an  outgoing 
partner  to  the  others  the  latter  could  not,  at  common  law,  sue 
in  their  own  names  alone  (except  where  the  claim  was  a  nego- 
tiable instrument)  but  must  sue  in  the  name  of  all  for  the  bene- 
fit of  the  assignees.11  Under  some  statutes  and  the  codes  of  pro- 
cedure, the  assignee  may  sue  in  his  own  name.12 

In  actions  upon  contract,  at  common  law,  a  mis-joinder  or  non- 
joinder of  necessary  parties  as  plaintiffs,  where  the  defect  ap- 
peared upon  the  face  of  the  pleadings,  could  be  taken  advantage 
of  by  demurrer,  motion  in  arrest  of  judgment,  or  writ  of  error  ; 
if  not  so  apparent,  by  plea  in  abatement  or  motion  for  a  non- 
suit. Under  the  codes  of  procedure,  the  objection  must  usually 
be  raised  by  pleading.18 

§327.  &.  Contracts  made  in  name  of  one  partner  for  the 
firm. — Where  the  contract  was  made  in  the  name  of  one  part- 
ner but  for  and  on  account  of  the  partnership,  the  action  should 
usually  be  brought,  on  simple  contracts,  in  the  name  of  all  the 
partners  who  constituted  the  partnership  at  the  time  the  con- 
tract was  made ; 14  on  a  simple  contract  in  writing  made  in  the 

8  See  Pugh  v.  Holliday  (1854),  3  79;  Mosgrove  v.  Golden  (1882),  101 
Ohio  St.  285.  Pa.  605. 

9  See   Murray  v.   Murray    (1821),          12  See  Viles  v.  Bangs   (1874),  36 
5  Johns.  (N.  Y.)  Ch.  60;  Browning  Wis.   131;   Walker  v.  Steel    (1886). 
v.  Marvin   (1880),  22  Hun  (N.  Y.)  9   Colo.  388,   12  Pac.  423;  West  v. 
547;    Pugh    v.    Holliday    (1854),    3  Citizens   Ins.   Co.    (1873),    27    Ohio 
Ohio  St.  285.  St.  1,  22  Am.  Rep.  294. 

10 See    In   re   Meyer    (1899),    39  13  See  Williams  v.   Southern  Pac. 

C.  C.  A.  368,  98  Fed.  976;  §414.  R.    Co.    (1895),    110    Cal.    457,    42 

11  See  Howell  v.  Reynolds  (1847),  Pac.  974;  Dodge  v.  Ship  Co.  (1869), 

12  Ala.  128;   Molen  v.  Orr   (1884),  37  How.  Pr.  (N.  Y.)   524,  31  N.  Y. 

44    Ark.    486;    Lunt    v.    Stephens  Super.  Ct.  453,  6  Abb.  Pr.   (N.  S.) 

(1845),  24   Me.    534;    Tate  v.   Ins.  451;  Molen  v.  Orr,  supra. 

Co.    (1859),    79    Mass.    (13    Gray)  14  Ordinary  informal  dealings  with 

290 


ACTIONS   BY   AND   AGAINST   PARTNERSHIP 


[§327 


name  of  one  partner,  either  the  partners  or  the  one  in  whose 
name  it  was  made  may  ordinarily  sue ; 16  if  the  contract  were 
expressly  made  with  one  partner  to  the  exclusion  of  the  partner- 
ship he  alone  must  sue  upon  it ; 16  on  a  contract  under  seal  or 
a  negotiable  instrument  the  action  must  be  brought  in  the  name 
of  the  partner  who  was  the  party  to  it.17 

Where  the  partners  sue  on  a  contract  made  by  one  partner 
who  did  not  disclose  the  existence  of  the  firm,  the  defendant  may 
usually  avail  himself  of  any  defenses  which  might  have  been 
open  to  him  if  the  partner  had  sued  in  his  own  name,  and  which 
he  had  acquired  before  he  knew  of  the  interest  of  the  partner- 
ship.18 


one  partner  who  was  acting  for  the 
partnership  would  usually  create 
rights  of  action  in  the  partnership. 
See  Creel  v.  Bell  (1829),  2  J.  J. 
Marsh.  (Ky.)  309;  De  Wit  v.  Lan- 
der (1888)  72  Wis.  120,  39  N.  W. 
349;  Kefauver  v.  Price  (1918),  138 
Ark.  342,  206  S.  W.  664. 

Where  several  partners  ostensibly 
carry  on  business,  but  in  the  name 
of  one  of  them  as  the  firm  name, 
all  should  sue.  Wilson  v.  Wallace 
(1822),  8  Serg.  &  Eawle  (Pa.)  53. 
An  undisclosed  partnership  would 
usually  stand  upon  the  same  footing 
as  to  rights  of  action  as  an  undis- 
closed principal.  (See  II  Mechem 
on  Agency,  §  2025) ;  Badger  v.  Dae- 
nieke  (1883),  56  Wis.  678,  14  N. 
W.  821;  Curtis  v.  Belknap  (1849), 
21  Vt.  433. 

15  See  Curtis  v.  Selknap,  supra, 
Partner  in  whose  name  a  bill  of 
lading  has  been  issued  may  sue  upon 
it.  Mo.  Pac.  B.  Co.  v.  Smith  (1892), 
84  Tex.  348,  19  S.  W.  509.  Partner 
in  whose  name  insurance  policy  was 
issued  may  sue  upon  it :  Mutual  F. 
Ins.  Co.  v.  Hammond  (1899),  106 
Ky.  386,  50  S.  W.  545,  20  Ky.  Law 
B.  1944;  Clement  v.  Brit.  Am.  Assur. 


Co.  (1886),  141  Mass.  298,  5.  N.  E. 
847. 

16  Where  a  written  contract  is  ex- 
pressly made  with  two  named  part- 
ners   of    a    named    partnership    of 
three,  the  two  named  only  may  sue. 
Hilliker  v.  Francesco  (1877),  65  Mo. 
598.      Creditor    who    knowingly    ac- 
cepts note  of  one  partner  and  gets 
judgment  upon  it  cannot  later  hold 
the  firm.    White  v.  Eech  (1895),  171 
Pa.  82,  32  Atl.  1130.    Where  action 
is  based  upon  legal  title  and  that 
is  in  one  partner,  he  is  proper  party. 
Trott  v.  Irish   (1861),  83  Mass.    (1 
Allen)   481.     See  also  Law  v.  Cross 
(1861),  66  U.  S.  533,  17  L.  ed.  185; 
The  Potomac  (1862),  67  U.  S.  581, 
17  L.  ed.  263. 

Partner  may  so  conduct  himself 
as  to  be  estopped  to  assert  that 
he  was  acting  for  himself  only  and 
not  for  the  partnership.  White  Mt. 
Bank  v.  West  (1858),  46  Me.  15. 

17  See  Metcalfe  v.  Eycroft  (1817), 
6  Maule  &  Sel.  75;   Scott  v.  Good- 
TV  in  (1797),  1  Bos.  &  Pul.  67;  State 
v.   Merritt    (1879),   70   Mo.  275. 

18  See     Gilbert      v.      Lichtenberg 
(1894),  98  Mich.  417,  57  N.  W.  259. 


291 


§§  328,  329]  LAW  OF  PARTNERSHIP 

§  328.  Actions  cannot  usually  be  brought  in  firm  name. — As 
has  already  been  noticed,  actions  cannot  be  brought  by  the  part- 
ners in  the  firm  name  unless  by  virtue  of  a  statute  authorizing 
it.  In  the  absence  of  such  a  statute,  partners  sue  collectively, 
but  as  individuals.  In  their  process  and  pleading  it  is  proper, 
though  not  usually  necessary,  to  allege  that  they  are  partners 
and  constitute  thp  firm  named.19 

In  many  states,  however,  there  are  now  statutes  authorizing 
suits  in  the  firm  name,  either  generally  or  where  the  individual 
names  are  not  known  at  the  time  the  action  is  commenced. 

In  a  number  of  States,  by  statute,  partners  doing  business  in 
a  so-called  "fictitious"  name20  may  not  sue,  though  they  may 
usually  be  sued.81 

§  329.  One  suing  for  all  where  partners  are  very  numerous. 

— Where  the  partners  are  very  numerous, — as  they  sometimes 
are  in  joint-stock  companies, — and  it  would  be  impracticable  or 
highly  inconvenient  to  join  them  all  as  plaintiffs,  it  is  sometimes 
provided  by  statute,  following  the  practice  in  equity,  that  one 
or  more  may  sue  for  the  benefit  of  all.28  A  mere  managing  part- 
is Where  the  plaintiffs  would  be  Schwartz  v.  Marcuee  (1917),  175 
entitled  to  recover  as  joint  parties  Cal.  401,  165  Pac.  1015;  Axe  v. 
merely,  the  failure  to  allege  that  Tolbert  (1914),  179  Mich.  556,  146 
they  were  partners  would  be  imma-  N.  W.  418;  Guiterman  v.  Wishon 
terial;  the  allegation  that  they  were  (1898),  21  Mont.  458,  54  Pac.  566; 
partners  would  be  surplusage;  and  Patterson  v.  Byers  (1907),  17  Okla. 
no  issue  could  properly  be  raised  633,  89  Pac.  1114,  10  Ann.  Cas.  810; 
respecting  it.  See  Marx  v.  Cul-  Bovee  v.  De  Jong  (1908),  22  S. 
pepper  (1898),  40  Fla.  322,  24  So.  Dak.  163,  116  N.  W.  83;  McFadden 
59;  Hyde  v.  Ford  Co.  (1894),  160  v.  jShanley  (1914),  16  Ariz.  91,  141 
Mass.  559,  36  N.  E.  585;  Courson  Pac.  732. 

v.  Parker  (1894),  39  W.  Va.  521,  22 See  Platt  v.  Colvin  (1893),  50 
20  S.  E.  583.  On  the  other  hand,  Ohio  St.  703,  36  N.  E.  735,  where 
there  would  be  cases  in  which  an  one  member,  who  was  also  the  presi- 
allegation  of  partnership  might  be  dent,  was  permitted  to  sue  in  Ohio 
necessary  to  identify  the  plaintiffs  for  the  United  States  Express  Com- 
as the  promisees  in  the  contract  sued  pany,  a  joint  stock  company.  In 
upon.  New  York,  where  the  company  was 

20  See  ante  §  121.  organized,  the  statute  authorized  ac- 

21  See      Holden      v.      Mensingar      tion  in  the  name  of  the  president. 
(1917),  175  Cal.  300,  165  Pac.  950;       Here  there  were  about  1,000  mem- 

292 


ACTIONS   BY    AND    AGAINST    PARTNERSHIP 


[§330 


ner,  however,  has  been  held  to  have  no  implied  authority,  under 
this  rule,  to  sue  as  the  representative  of  all.23 

2.   In  Tort. 

§330.  All  partners  must  sue  for  torts  affecting  firm. — In 
actions  for  torts  committed  against  the  partners  as  such,  such 
as  trespass  to  partnership  property,  injury  to  its  business,  libels 
upon  it,  and  the  like,  all  of  the  partners  must  join  as  plaintiffs.24 
One  partner  alone,  therefore,  cannot  ordinarily  maintain  an 
action  to  recover  damages  for  an  injury  to  partnership  prop- 
erty, i.  e.,  he  cannot  recover  alone  for  the  joint  injury,  nor  can 
he  ordinarily  recover  separately  for  his  share  of  the  joint  in- 
jury.25 Where  he  alone  had  possession,  he  might  maintain  pos- 
sessory actions.  There  can  be  no  recovery,  on  the  other  hand, 
in  the  action  by  the  firm,  for  injuries  which  only  affect  one  or 
more  partners  personally.26  Thus,  for  example,  when  suing  for 
a  libel  upon  the  firm,  the  injury  to  the  firm  business  is  only  to 
be  recovered  for  in  the  joint  action,  and  not  the  injury  to  the 
feelings  of  the  partners  personally ; 27  and  when  suing  for  the 


bers.  But  35  are  not  "very  numer- 
ous," i.  e.,  so  numerous  that  it  is 
impracticable  to  join  them:  Kirk  v. 
Young  (1856),  2  Abb.  Pr.  (N.  Y.) 
453;  nor  are  40,  Brainerd  v.  Ber- 
tram (1878),  5  Abb.  N.  C.  (N.  Y.) 
102.  In  Chancey  v.  May  (1722), 
Finch's  Free.  Chan.  592,  there  were 
apparently  about  800. 

See  also  McKenzie  v.  L'Amoureux 
(1851),  11  Barb.  (N.  Y.)  516;  Wall 
v.  Boisgerard  (1848),  11  Sm.  &  M. 
(Miss.)  574;  George  v.  Benjamin 
(1898),  100  Wis.  622,  76  N.  W.  619, 
69  Am.  St.  E.  963. 

23  See  Brainerd  v.  Bertram,  supra. 

24  See  White  v.  Campbell  (1893), 
18  E.  I.   150,   26  Atl.  40;    Hughes 
v.  Boring  (1860),  16  Cal.  81;  Peaks 
v.  Graves    (1888),  25  Neb.  235,  41 
]SVW.  151;  Farnum  v,  Ewell  (1887), 


59  Vt.  327,  10  Atl.  527;  Medbury  v. 
Watson  (1843),  47  Mass.  (6  Mete.) 
246,  39  Am.  Dec.  726;  Forster  v. 
Lawson  (1826),  3  Bing.  452,  Burd. 
Cas.  303. 

25  See  Sindelare  v.  Walker  (1891), 
137   111.   43,   27   N.   E.   59,   31   Am. 
St.  E.  353,  Mechem  's  Cas.  194,  Burd. 
Cas.  304.    See,  also,  White  v.  Camp- 
bell  (1893),   18  E.  I.   150,  26  Atl. 
40;  Bigelow  v.  Eeynolds  (1888),  68 
Mich.  344,   36  N.   W.   95;    Seed  v. 
Gould    (1895),    105    Mich.    368,    63 
N.  W.  415,  55  Am.  St.  E.  453. 

26  See    Calkins   v.    Smith    (1872), 
48  N.  Y.  614,  8  Am.  Eep.  575. 

27  See   Donnell   v.   Jones    (1848), 
13  Ala.  490,  48  Am.  Dec.  59;  Dona- 
ghue  v.  Gaffy  (1885),  53  Conn.  43, 
2    Atl.    397.      Compare    Collier    v. 
Postum  Cereal  Co.   (1912),  150  N. 


293 


§  331]  LAW  OF  PARTNERSHIP 

wrongful  seizure  of  property,  the  seizure  of  the  individual  prop- 
erty of  one  partner  is  not  to  be  considered.28 

The  same  wrongful  act  may,  of  course,  occasion  both  a  part- 
nership and  an  individual  loss,  so  that  a  joint  action  for  the 
joint  wrong,  and  individual  actions  for  the  individual  wrongs 
might  be  maintained.  In  the  same  general  act  there  may  also 
be  duties  to  the  partnership  and  other  duties  to  the  individual, 
for  the  violation  of  either  of  which  an  action  might  be  brought.29 

3.   Effect  of  Personal  Disability. 

§  331.  Effect  of  disability  of  one  partner — Recovering  prop- 
erty wrongfully  disposed  of  by  him. — Where  one  partner  has 
wrongfully  disposed  of  partnership  property,  securities  or 
money  (as  by  using  it  to  pay  his  own  private  debts),  or  has  at- 
tempted, for  the  same  purpose,  to  permit  his  own  debt  to  be 
set  off  against  a  partnership  demand,  the  question  whether  an 
action  at  law  may  be  maintained  to  recover  it  or  its  value  from 
the  transferee  is  involved  in  dispute.  It  is  said  in  many  cases 
that  no  such  action  can  be  maintained, — not  by  the  other  part- 
ner alone,  for  the  property  did  not  belong  to  him  alone,  and  he 
cannot  even  recover  to  the  extent  of  his  interest  without  an  ac- 
counting ; 30  and  not  by  an  action  in  which  all  of  the  partners, 
including  the  guilty  one,  are  parties,  for  the  guilty  partner 
could  not  recover  if  he  alone  were  involved  (having  consented 
to  the  act),  and  to  allow  a  recovery  where  he  is  one  of  the  plain- 
tiffs is  to  permit  him  to  profit  by  his  own  wrong.31  The  remedy 

Y.    App.   Div.   169,    134   N.   Y.    S.  vidual  account  of  one  so  carelessly 

847  with  Wills  v.  Jones  (1898),  13  that  he  suffered  loss,  an  action  may 

App.  Gas.  D.  C.  482.  be  brought  by  that  one.     Story  v. 

28 See  Watts  v.  Kice    (1883),   75  Eichardson    (1839),   6   Bing.  N.   C. 

Ala.  289.    Partners  in  a  joint  action  123. 

may  not  recover  for  seizure  of  indi-  30 See  Eeed  v.  Gould  (1895),  105 

vidual  exemptions  of  each.     Eogers  Mich.  368,  63  N.  W.  415,  55  Am.  St. 

v.    Eaynor    (1894),    102    Mich.   473,  E.  453;  Bumpus  v.  Turgeon  (1904), 

60  N.  W.  980.  98  Me.  550,  57  Atl.  883;   White  v. 

89  Where  the  defendant  was  em-  Campbell   (1893),  18  E.  I.  150,  26 

ployed  to  make  out  a  firm  account  Atl.  40. 

and  also  an  individual  one  for  each  31  See  Jones  v.   Yates    (1829),   9 

partner,  and  he  made  out  the  indi-  B.  &  C.  532  (by  assignee  of  firm) : 

294 


ACTIONS   BY   AND    AGAINST   PARTNEKSHIP 


[§331 


of  the  innocent  partner,  according  to  these  cases,  is  either  against 
the  guilty  partner  alone,  or  in  equity  against  him  and  the  trans- 
feree in  a  forum  where  all  rights  can  be  adjusted.32 

Many  other  cases,  on  the  other  hand,  permit  the  action  to  be 
maintained,  either  in  the  names  of  all  for  the  benefit  of  the  in- 
nocent partner,33  or  in  the  latter 's  name  alone  to  recover  to  the 
extent  of  his  interest.34  This  disability  would  not  exist  where 


[But  see  Heilbert  v.  Nevill  (1869), 
L.  E.  4  Com.  P.  354] ;  Homer  v. 
Wood  (1853),  65  Mass.  (11  Gush.) 
62;  Farley  v.  Lovell  (1869),  103 
Mass.  387;  Grover  v.  Smith  (1896), 
165  Mass.  132,  42  N.  E.  555,  52  Am. 
St.  E.  506;  Cornells  v.  Stanhope 
(1883),  14  E.  I.  97;  Greeley  v. 
Wyeth  (1838),  10  N.  H.  15;  Chase 
v.  Bean  (1877),  58  N.  H.  183;  Craig 
v.  Hulsehizer  (1871),  34  N.  J.  L. 
363;  Blodgett  v.  Sleeper  (1877),  67 
Me.  499;  Bumpus  v.  Turgeon,  supra; 
Church  v.  First  Nat.  Bank  (1877), 
87  111.  68  [compare  McNair  v.  Platt 
(1867),  46  111.  211];  Carrie  v. 
Cloverdale  (1891),  90  Cal.  84,  27 
Pac.  58;  Estabrook  v.  Messersmith 
(1864),  18  Wis.  545  [compare  Cotz- 
hausen  v.  Judd  (1877),  43  Wis.  213, 
28  Am.  Eep.  539], 

32  See  Hoff  v.  Eogers   (1889),  67 
Miss.  208,  7  So.  358,  19  Am.  St.  E. 
301. 

33  See  Eogers  v.  Batchelor  (1838), 
37  U.  S.   (12  Peters)   221,  9  L.  ed. 
1063;    Johnson  v.   Crichton    (1880), 
56  Md.  108;  Dob  v.  Halsey  (1819), 
Ifi  Johns.   (N.  Y.)    34,  8  Am.  Dee. 
293;    Forney  v.   Adams    (1881),   74 
Mo.  138;  Ackley  v.  Staehlin  (1874), 
56     Mo.     558;     Nail     v.     Mclntyre 
(1858),  31  Ala.  532;  Buck  v.  Mose- 
ley  (1852),  24  Miss.  170;  Daniel  v. 
Daniel    (1848),    9    B.    Mon.    (Ky.) 
195. 


34  See  McNair  v.  Wilcox  (1888), 
121  Pa.  437,  15  Atl.  575,  6  Am.  St. 
E.  799;  Doll  v.  Hennessy  Merc.  Co. 
(1905),  33  Mont.  80,  81  Pac.  625; 
Phillips  v.  Thorp  (1903),  12  Okla. 
617,  73  Pac.  268;  Eady  v.  Newton 
Coal  Co.  (1905),  123  Ga.  557,  51  S. 
E.  661,  1  L.  E.  A.  (N.  S.)  650;  as 
assignee  of  other  partner,  Viles  v. 
Bangs  (1874),  36  Wis.  131.  See, 
also,  Liberty  Bank  v.  Campbell 
(1881),  75  Va.  534. 

Where  the  wrongful  disposal  by 
one  partner  occurred  after  the  dis- 
solution and  after  all  firm  debts 
were  paid,  other  may  recover  to  the 
extent  of  interest:  Hogendobler  v. 
Lyon  (1893),  12  Kan.  276.  Where 
one  partner  fraudulently  released  a 
firm  claim  on  receipt  of  a  portion 
of  it,  and  deposited  one  half  of  the 
sum  so  received  in  a  bank  for  his 
copartner,  the  latter  was  permitted 
to  recover  one  half  of  the  residue. 
Busby  v.  Books  (1904),  72  Ark.  657, 
8]  S.  W.  1056.  But  in  a  case  (not 
officially  reported)  in  Kentucky, 
where  the  circumstances  were  similar 
except  that  the  fraudulent  partner 
kept  the  whole  sum  received,  the 
other  partners  were  permitted  to 
recover  the  whole  claim.  Phoenix 
Ins.  Co.  v.  Miller  (1891),  13  Ky.  L. 
Eepr.  464. 


295 


§§332,333]  LAW  OF   PARTNERSHIP 

one  partner  has  acquired,  e.  g.,  by  assignment,  the  right  to  sue 
in  his  own  name  alone  without  joining  the  guilty  partner.35  So 
if  the  innocent  partner  survived  the  other,  he  could  recover.88 

II.  PARTIES  TO  ACTIONS  AGAINST  THE  PARTNERSHIP. 

§  332.  Who  should  be  sued  in  actions  against  the  firm. — The 

question,  who  are  proper  parties  defendant  in  actions  against 
the  partnership,  presents  substantially  the  same  considerations 
as  the  question  who  should  be  plaintiffs,  though  the  two  cases 
are  not  identical. 

1.   In  Contract. 

§  333.  All  actual  and  ostensible  partners  should  be  joined. — 

The  contract  obligations  of  the  firm  being  joint,  all  of  the  actual 
and  ostensible  partners  who  were  such  at  the  date  of  the  con- 
tract must,  as  a  rule,  be  joined  as  parties  defendant  in  actions 
on  contract.37  Failure  to  join  them  must,  however,  at  common 
law,  be  taken  advantage  of  by  a  plea  in  abatement,38  unless  the 
defect  appeared  upon  the  face  of  the  papers,  in  which  case  the 
question  could  be  raised  by  demurrer,  motion  in  arrest  of  judg- 
ment, or  writ  of  error.39  This  rule  of  joinder,  however,  has  been 
changed  in  several  states  by  statutes  which  make  joint  debts 
joint  and  several  at  the  option  of  the  obligee.40 

As  has  been  seen,  the  fact  that  one  who  was  a  partner  when 
the  contract  was  made  has  since  retired  will  not  of  itself  relieve 
him  from  liability ;  neither  can  one  who  was  not  then  a  partner, 

35 See  Brickett  v.  Downs   (1895),  land   v.   Woodward    (1843),   15   Vt. 

163  Mass.  70,  39  N.  E.  776,  Burd.  302,  40  Am.  Dec.  682,  Mechem's  Gas. 

Gas.  215.  388;   Wilson  v.   McCormick    (1890), 

36  See   Binns   v.   Waddill    (1879),  86  Va.  995,  11  S.  E.  976. 

32  Gratt.  (Va.)  588.  39  See  Sandusky  v.  Sidwell,  supra; 

37 See  Smith  v.  Cooke   (1869),  31  Sinsheimer    v.     Skinner    Mfg.     Co. 

Md.    174,    100    Am.    Dec.    58;    San-  (1897),  165  111.  116,  46  N.  E.  262. 

dusky   v.    Sidwell    (1898),    173    111.  40  This   seems   to   be   the   case  in 

493,  50  N.  E.  1003;  Harrison  v.  Me-  Alabama,  Arkansas,  Colorado,  Geor- 

Cormick  (1886),  69  Gal.  616,  11  Pac.  gia,  Iowa,  Kansas,   Kentucky,  Mis- 

456.  sissippi,    Missouri,    Montana,    New 

38  See  Fogg  v.  Virgin  (1841),  19  Jersey,  New  Mexico,  North  Carolina 

Me.  352,  36  Am,  Dee.  757;   Cleve-  and  Tennessee. 

296 


ACTIONS    BY    AND    AGAINST    PARTNERSHIP     [§§334,335 

but  has  since  come  in,  be  held  liable  unless  by  novation  or  other- 
wise he  has  assumed  liability  in  such  a  way  that  the  creditor 
may  proceed  against  him  at  law.41 

If  the  partnership  was  dissolved  by  death,  then,  as  will  be  seen, 
legal  actions  usually  may  be  brought  against  the  survivors  only, 
and  the  representatives  of  the  deceased  partner  are  not  to  be 
joined;42  though  recourse  may  usually  be  had  in  equity  to  the 
estate  of  the  deceased  partner.43 

§  334.  —  How  when  contract  made  in  name  of  one  partner. — 

Where  a  partner  is  known  to  be  acting  as  such  for  a  known 
partnership,  it  is  the  presumption  that  all  of  the  ordinary,  in- 
formal contracts  which  he  makes  are  upon  the  account  of  the 
partnership,  and  they  should  be  enforced  in  the  usual  manner. 
If,  however,  credit  were  given  to  him  to  the  exclusion  of  the 
partnership,  he  would  be  the  only  one  bound  to  the  other  party. 
In  making  formal  contracts  in  writing,  he  may  so  stipulate  as 
to  bind  himself,  even  though  that  may  not  have  been  his  actual 
intention.  On  non-negotiable  and  simple  contracts  so  made, 
the  partners  would  also  usually  be  liable  at  the  option  of  the 
other  party,  even  though  so  framed  that  the  single  partner  might 
be  sued  alone.  Dormant  and  secret  partners  are  dealt  with  in 
the  next  section. 

§  335.  Dormant  and  secret  partners  proper  but  not  necessary 
parties. — Dormant  and  secret  partners  are  proper  but  not  nec- 
essary parties.  If  the  contract  were  made  by  one  partner  in  his 
own  name,  but  really  for  the  firm,  that  partner  or  all  of  the 
partners  may  be  sued,  if  it  were  a  simple  contract;  but  if  it 
were  a  specialty  or  a  negotiable  instrument  the  partner  named  in 
it  as  the  maker  of  it  can  alone  be  sued  upon  it.44 

The  ordinary  rules  of  agency  respecting  the  liability  of  an 
undisclosed  principal  apply  here. 

«  See  ante,  §§  317-321.  (1864),  30  N.  Y.  374;  Scott  v.  Con- 

42  See  post,  §402.  way  (1874),  58  N.  Y.  619;  Page  v. 

43  See  post,  §411.  Brant   (1856),  18  111.  37;  Hatch  v. 
44 See     Cleveland     v.     Woodward  Wood  (1862),  43  N.  H.  633;  Wright 

(1843),  15  Vt.  302,  40  Am.  Dec.  682,      v.  Herrick  (1878),  125  Mass.  154. 
Mechem's  Cas.  388;  North  v.  Bloss 

297 


§§  336-338]  LAW  OP  PAETNEBSHIP 

§336.  Nominal  partners.  —  Similarly,  a  nominal  partner, 
i.  e.,  one  who  is  not  really  a  partner  but  who  has  caused  or  per- 
mitted himself  to  appear  to  the  plaintiff  to  be  a  partner,  is  a 
proper  but  not  a  necessary  party.  He  may  be  held,  but  the 
plaintiff  may  decline  or  omit  to  do  so,  and  rely  on  those  who  are 
in  fact  the  partners,  if  he  can  make  a  case  against  them.45  If 
there  were  no  actual  partners  or  if  they  were  not  liable  for  the 
act,  as  for  example  /  where  it  was  the  unauthorized  act  of  the 
nominal  partner  only,  the  latter  alone  would  be  liable. 

§  337.  Firm  as  such  not  to  be  sued,  except  by  statute. — As  in 

the  case  of  parties  plaintiff  already  referred  to,  the  firm  as  such 
is  not  such  a  legal  entity  as  may  be  sued,  except  where  some 
statute  so  declares.46  Nor,  in  the  absence  of  a  statute,  may 
actions  be  brought  against  the  partners  in  the  firm  name ;  though 
statutes  are  common  which  give  such  a  right,  either  generally 
or  to  sustain  the  action  until  the  proper  individual  names  can 
be  learned  and  supplied. 

2.  Actions  of  Tort. 

§  338.  Actions  of  tort  may  be  brought  against  all  or  any  of 
the  partners. — Causes  of  action  in  tort  for  wrongs  for  which 
the  partnership  is  responsible,  whether  committed  by  a  partner 
or  by  partnership  servants  or  agents,  and  not  essentially  con- 
sisting of  a  breach  of  a  partnership  contract,  are  not  joint,  but 
joint  and  several,  and  the  suit  may  be  brought  against  all  or 
any  of  the  partners.47 

45  See  Hatch  v.  Wood  (1862),  43  of  process  on  one  partner,  with  a  re- 
N.     H.     633;     Wright    v.     Herrick,  turn,  of  non  est  inventus  as  to  the 
supra;  Scarf  v.  Jardine   (1882),  L.  ethers,   shall  authorize   a  judgment 
E.  7  App.  Cas.  345,  Mechem  '&  Gas.  against  the  firm  binding  all  the  firm 
484;   Ex  parte  Watson    (1815),   19  assets   and   the   individual   property 
Ves.  459;  Thayer  v.  Goss  (1895),  91  of  the  one  served." 

Wis.   90,  64  N.  W.  312,  Mechem 's          In     penal      actions,     proceedings 

Cas.  492.  should  be  against  the  partners,  not 

46  Thus    in    Georgia    the    statute  against  the  firm  as  an  entity.  People 
(§3167,      Code      1911),      provides:  v.  Paisley   (1919),  288  111.  310,  123 
"Judgments  may  be  entered  up  and  N.  E.  573. 

execution  issue  in  the  name  of  the  47  See  Albright  v.  McTighe 
firm  or  against  a  firm.  And  service  (1892),  49  Fed.  817;  Wisconsin 

298 


ACTIONS    BY   AND    AGAINST    PARTNERSHIP     [§§339,340 

An  exception  to  this  rule  was  said  to  exist  where  the  action 
arises  in  respect  of  their  common  interest  in  land,  where  all 
ought  to  be  joined ;  but  this  distinction  was  not  continued  under 
the  English  Partnership  Act.48 

§339.  No  action  against  firm  as  such,  except  by  statute. — 
As  in  the  preceding  subdivision,  no  action  for  a  tort  lies  against 
the  firm  as  such,  except  by  statutes;  but  under  the  Georgia 
statute,  for  example,  it  has  been  held  that  the  partnership  as  a 
separate  entity  may  be  held  liable  for  a  tort.49 

III.  SET-OFF  IN  ACTIONS  BY  AND  AGAINST  THE  PARTNERSHIP. 

§  340.  Set-off  of  individual  and  of  partnership  claims. — The 

question  whether  in  an  action  by  or  against  the  partnership 
there  may  be  a  set-off  of  individual  against  partnership  de- 
mands and  vice  versa,  is  one  which  frequently  arises,  and  seems 
to  be  somewhat  related  to  the  question  of  parties  which  has  just 
been  considered.  The  question  of  set-off  in  general  is  the  ques- 
tion whether  the  defendant  in  an  action  may  avail  himself  in 
his  defense  of  a  claim  which  he  has  against  the  plaintiff  who  is 
suing  him,  instead  of  bringing  a  separate  action  to  enforce  it. 
If  the  claim  in  question  is  one  for  a  reduction  or  allowance 
arising  out  of  the  very  transaction  upon  which  the  plaintiff  sues, 
it  is  usually  a  matter  for  recoupment  rather  than  set-off;  if  it 

Cent.  R.  Co.  v.  Boss  (1892),  142  111.  in  tort,  is  really  founded  upon  the 

9,  31  N.  E.  412;  Creed  v.  Hartmann  breach    of    a    partnership    contract, 

(1864),  29  N.  Y.  591,  86  Am.  Dec.  (e.   g.,   the    liability    of    a    firm    of 

341;   Wood  v.  Luscomb    (1868),  23  physicians  under  their  implied  con- 

Wis.     287;      Fletcher     v.     Ingram  tract  to  use  skill,)    the  liability  is 

(1879),  46  Wis.  191,  50  N.  W.  424;  joint:     Whittaker  v.  Collins  (1885), 

Howe  v.  Shaw  (1868),  56  Me.  291;  34  Minn.  299,  25  N.  W.  632,  57  Am. 

Hess    v.    Lowrey    (1890),    122    Ind.  Rep.    55;    Hess    v.    Lowrey,   supra; 

225,  23  N.  E.  156,  7  L.  E.  A.  90,  17  Hyrne  v.  Erwin,  supra. 

Am.  St.  E.  355,  Mechem's  Gas.  400;  48  Lindley    on    Partnership     (7th 

Hyrne  v.  Erwin   (1885),  23  S.  Car.  ed.),  320. 

226,  55  Am.  Rep.  15 ;  Rice  v.  Van  49  See   Page   v.   Citizens  Banking 
Why    (1910),  49  Colo.   7,   111  Pac.  Co.    (1900),   111   Ga.   73,    36   S.'E. 
599.  41S,  78  Am.  St.  R.  144,  51  L.  E.  A. 

When  the  action,  though  in  form      463,  Mechem's  Gas.  954. 

299 


§  341]  LAW  OP  PARTNERSHIP 

arises  independently  and  out  of  other  transactions,  it  is  a  mat- 
ter for  set-off.  The  common  law  did  not  permit  set-off  in  actions 
at  law  but  left  each  party  to  enforce  his  own  claim  by  separate 
legal  action.  This  condition,  however,  has  now  been  very  widely 
changed  by  statutes,  which  permit  set-off  under  the  conditions 
prescribed  by  the  statute,  though  the  statutes  differ  somewhat 
in  terms  and  their  interpretation  is  not  always  uniform.  Be- 
fore these  statutes,  courts  of  equity  permitted  set-off  in  equit- 
able actions  under  certain  circumstances,  and  a  distinct  equita- 
ble jurisdiction  of  this  sort  is  still  recognized. 

§  341. Under  the  statutes  of  set-off  the  claim  sought  to 

be  set  off  and  the  one  sued  upon  must,  in  general,  be  mutual: 
they  must  arise  between  the  same  parties  and  be  due  in  the  same 
right.  Consequently  in  an  action  by  the  partners,  upon  a  part- 
nership demand,  a  debt  due  from  one  partner  only,  or  from  any 
number  less  than  all,  cannot  ordinarily  be  set  off.50  To  do  so, 
moreover,  is  to  pay  the  individual  debt  of  the  partner  out  of 
the  partnership  assets,  and  this  may  not  be  done  without  the 
consent  of  the  other  partners.  They  might  give  such  consent, 
in  many  cases,  expressly  or  by  implication,61  though  they  would 
not  be  free  to  do  so  if  the  partnership  were  insolvent. 

For  similar  reasons,  if  a  partner  sues  for  a  debt  due  to  him 
individually,  the  defendant  may  not  set  off  a  debt  due  him  from 
the  partnership,  without  the  plaintiff's  consent,62  except  where 

50  See  Cannon  v.  Lindsey  (1887),  v.    Hardware   Co.    (1891),   95   Ala. 

85  Ala.  198,  3  So.  676,  7  Am.  St.  R.  324,  11  So.  195. 
38;  Meeker  v.  Thompson  (1875),  43          51  Thus  in  Clark  v.  Taylor  (1880), 

Conn.  77;  Bush  v.  Thompson  (1887),  68  Ala.  453,  it  is  said  that  such  a 

112  Ind.  158,  13  N.  E.  665;  Jones  v.  set-off  may  be  allowed  where  a  usage 

Steamboat  Co.   (1897),  90  Me.  120,  of  the  firm  is  proved  establishing  a 

37     Atl.     879;     Payne     v.     O'Shea  clear  and  uniform  practice  to  allow 

(1884),  84  Mo.   129;    McDonald  v.  such  set-off,  or  where  the  consent  of 

Mackenzie  (1887),  24  Oreg.  573,  14  all    the    partners    is    satisfactorily 

Pac.  866.  shown,  citing  Hood  v.  Riley  (1835), 

Same,  where  an  assignee  or  repre-  15  .N.  J.  L.  127.    See,  also,  Morgen- 

aentative  of  the  partnership  is  suing :  thau  v.  King  (1890),  15  Colo.  413, 

Boykin  v.  Persons   (1891),  95  Ala.  24  Pac.  1048. 
626,  11  So.  67.  52  See  Ingols  v.  Plimpton  (1887), 

One  partner  alone  cannot,  by  his  10  Colo.  535,  16  Pac.  155;  Houston 

agreement,  change  the  rule:    Cowen  v.    Brown     (1861),    23    Ark.    333; 

300 


ACTIONS   BY   AND    AGAINST    PABTNERSHIP  [§  341 

partnership  debts  are  made  joint  and  several,63  or  where  the 
plaintiff,  by  assumption  or  otherwise,  has  become  individually 
liable  to  pay  the  claim  so  offered  as  a  set-off.64 

In  an  action  against  one  partner  for  a  debt  due  from  him 
individually,  he  may  not  set  off  a  debt  due  from  the  plaintiff 
to  the  partnership,65  unless  that  debt  has  been  assigned  to  him,56 
or  his  copartners  consent  that  he  may  so  use  it,  and  the  rights 
of  third  persons  will  not  be  prejudiced  thereby.57 

In  an  action  against  the  partners  for  a  partnership  debt,  they 
may  of  course  set  off  any  claim  which  the  partnership  has  against 
the  plaintiff,  but  it  is  held  that  they  may  not  ordinarily  set  off 
individual  claims  which  they  or  any  of  them  may  separately 
have  against  the  plaintiff ;  68  though,  mutuality  aside,  there  seems 
to  be  no  good  reason  why  a  partner  should  not  thus  use  his  in- 
dividual credits  to  pay  the  partnership  debts  if  he  so  desires 
and  if  his  own  creditors  are  not  thereby  injured,  and  under  some 
statutes  it  has  been  permitted.69 

Where  there  is  a  dormant  partner  that  fact  will  not  ordi- 
narily be  permitted  to  defeat  a  set-off  good  against  the  ostensible 
partners.60 

The  question  of  set-off  in  actions  by  and  against  the  surviving 
partner  is  considered  in  another  section.61 

Jones  v.  Steamboat  Co.,  supra;  Jack-  57  See  Collins  v.  Campbell  (1902), 
son  v.  Clymer  (1862),  43  Pa.  79.  97  Me.  23,  53  Atl.  837,  94  Am.  St. 

53  See  Allen  v.  Maddox  (1874),  40      R.  458. 

Iowa  124  (but  see  Hoyt  v.  Murphy  58  See  Wilson   v.   Runkel    (1875), 

(1858),  18  Ala.  316;  Drennen  v.  Gil-  38    Wis.    526;    Pinckney    v.    Keyler 

more   (1901),  132  Ala.  246,  31   So.  (1855),  4  E.  D.  Smith  (N.  Y.)  469; 

90,  90   Am.    St.   E,    902);    Eust   v.  Cooley  v.  Sears  (1861),  25  111.  613, 

Burke   (1882),  57  Tex.  341;  Moody  (501);  Beauregard  v.  Case  (1875). 

v.  Willis  (1867),  41  Miss.  347.  91  U.  S.  134,  23  L.  ed.  263. 

54  See  Hoyt  v.  Murphy,  supra.  58  See  Doimell  v.  Portland,  etc.,  R. 

55  Jones  v.  Blair  (1876),  57  Ala.  Co.  (1884),  76  Me.  33. 

457;    Western    Coal   Co.   v.    Hollen-'  60  See  Bryant  v.  Clifford   (1854), 

beck  (1903),  72  Ark.  44,  80  S.  W.  27  Vf.  664,  Gilm.  Cas.  246;   Dixon 

145;  Olson  v.  Lamb  (1898),  56  Neb.  Livery  Co.  v.  Kane  (1915),  117  Va. 

104,  76  N.  W.  433,  71  Am.   St.  E.  656,  86  S.  E.  106,  L.  E.  A.  1916  A 

670;    Wrenshall  v.   Cook    (1838),   7  1211;  Willey  v.  Crocker  Nat.  Bank 

Watts  (Pa.)  464.  (1904),  141  Cal.  508,  75  Pac.  106, 

56  See  Hall  y.   Allen   (1883),  80  61  See  post,  f  402,  note, 
Mo,  286, 

301 


§  342]  LAW   OF   PARTNERSHIP 

§  342.  Set-off  in  equity  is,  in  general,  governed  by  the 

same  principles  of  mutuality  as  those  which  prevail  at  law,  but 
courts  of  equity  will  at  times  allow  a  set-off  which  the  statutes 
would  not  permit,  especially  where  the  plaintiff  is  shown  to  be 
insolvent  and  the  defendant  would  therefore  probably  not  be 
able  to  collect  the  demand  in  question  if  he  is  driven  to  a  sep- 
arate action.62 

62 See  Watts  v.  Sayre  (1884),  76  v.  Gaither   (1904),  98  Md.  541,  56 

Ala.  397;  West  v.  Kendrick  (1872),  Atl.  965;  Spofford  v.  Kowan  (1891), 

46  Ga.  526;  Hall  v.  Kimball  (1875),  124  N.  Y.  108,  26  N.  E.  350;  Selig- 

77  111.  161;   Chamberlin  v.  Stewart  mann  v.  Heller  (1887),  69  Wis.  410, 

(1837),  6  Dana  (Ky.)  32;  Dubrenil  34  N.  W.  232. 


302 


CHAPTER  XV. 


OF   THE  DISSOLUTION  OF   THE  PAKTNEESHIP. 


§  343.  Purpose  of  this  chapter. 
344.  Of  the  methods  of  dissolution 
in  general. 


I.  DISSOLUTION  BY  ACT  OF  THE 
PARTIES. 

1.  Dissolution    by    Original 
Agreement. 

345.  What  methods  included. 

346.  Dissolution   by  lapse   of 

time. 

347.  Dissolution     by     accom- 
plishment of  object. 

348.  Dissolution  upon  a  pre- 


scribed event  or  condition. 

2.  Dissolution  ~by  Subsequent  Act 
of  Parties. 

349.  In  general.  HI. 

350.  Dissolution    by    act    of    all — 

Mutual  consent.  373. 

351.  Dissolution    by    act    of    one         374. 

partner — Partnerships       at          375. 
will. 

352.  Dissolution    by    act    of    one          376. 

partner — Partnership        on 
condition.  377. 

353, 354.  Dissolution  by  one  part- 
ner     when      for      definite         378. 
period — Dissolution  in  con- 
travention   of    partnership 
agreement.  379. 

355-358.  Can  there  be  an  in-          380. 

dissoluble  partnership?  381. 

359.  Method   of   dissolving  by  act 

of  partner.  382. 

303 


II.  DISSOLUTION  BY  HAPPENING  OF 

EVENTS. 
§360.  What   here    included. 

361.  Death  of  a  partner. 

362.  Bankruptcy  of  a  partner. 

363.  Assignment     or     seizure     of 

partner's  interest. 

364.  Voluntary  sale  of  interest  by 

one  partner. 

365.  Insanity  of  a  partner. 

366.  Marriage  of  partner. 

367.  Guardianship  of  a  partner. 

368.  Expulsion  of  a  partner. 

369.  War. 

370.  Illegality. 

371.  Happening    of    a    stipulated 

event. 

372.  Reorganization  —  Incorpora- 

tion. 


DISSOLUTION  BY  JUDICIAL 
DECREE. 

Declaring  void. 

Dissolving  in  equity. 

Causes        for        dissolution — 

Fraud. 
Insanity     or     incapacity 

of  partner. 
Misconduct 


of    a    part- 
ner. 

—  Must  not  be  misconduct 
of  partner  seeking  dissolu- 
tion. 

—  Irreconcilable  discord. 

—  Impossibility  of  success. 

—  Under  Uniform  Partner- 


ship Act. 
Receivership  in  these  cases. 


§§343,344]  LAW  OP  PARTNERSHIP 

§  343.  Purpose  of  this  chapter. — Having  now  seen  something 
of  the  creation  of  partnership  and  of  its  incidents  and  conse- 
quences, attention  may  next  be  directed  to  the  question  of  the 
dissolution  of  the  relation,  and  of  the  consequences  of  such 
dissolution.  Two  expressions  are  here  often  used  more  or  less 
interchangeably — dissolution  and  termination,  though  a  distinc- 
tion may  be  and  often  is  made  between  them.  Thus  the  Uni- 
form Partnership  Act  defines  dissolution  of  the  partnership  as 
' '  the  change  in  the  relation  of  the  partners  caused  by  any  partner 
ceasing  to  be  associated  in  the  carrying  on,  as  distinguished  from 
the  winding  up,  of  the  business. " l  It  also  declares  that  ' '  on 
dissolution  the  partnership  is  not  terminated,  but  continues  until 
the  winding  up  of  partnership  affairs  is  completed. ' ' 2  The 
same  idea  is  sometimes  expressed  by  distinguishing  between  the 
termination  of  the  original  relation,  and  the  winding  up  of  the 
business.  For  the  sake  of  uniformity,  the  nomenclature  of  the 
Partnership  Act  will  be  adopted  here. 

§  344.  Of  the  methods  of  dissolution  in  general. — The  meth- 
ods by  which  the  partnership  relation  may  be  dissolved  may  be 
classified  under  three  heads:  I.  By  the  act  of  the  parties.  II. 
By  the  happening  of  some  event.  III.  By  decree  of  a  court.  The 
first  of  these  may  be  further  subdivided  as  follows :  1.  By  virtue 
of  the  original  agreement  of  the  parties.  2.  By  force  of  their 
subsequent  act. 

The  Uniform  Partnership  Act 8  proceeds  upon  a  somewhat 
different  plan,  considering  first  causes  which  result  in  dissolu- 
tion "without  violation  of  the  agreement  between  the  partners," 
such  as  lapse  of  time,  accomplishment  of  object,  mutual  con- 
sent, act  of  one  where  partnership  was  at  will,  and  expulsion  of 
a  member  in  pursuance  of  a  power  contained  in  the  articles; 
next,  dissolution  "in  contravention  of  the  agreement  of  the  part- 
ners, ' '  as  where  One  partner  without  excuse  attempts  to  dissolve 
a  partnership  created  for  a  term  not  yet  expired ;  then  dissolu- 
tion by  the  happening  of  events,  like  death  or  bankruptcy,  and 
finally,  dissolution  by  decree  of  a  court. 

1  Sec.  29.  3  Sec.  31. 

2  Sec.  30. 

304 


DISSOLUTION  OF  PARTNERSHIP  [§§  345-348 

I.  DISSOLUTION  BY  ACT  OP  THE  PARTIES. 
1.  Dissolution  by  Original  Agreement. 

§345.  What  methods  included. — The  partnership  may  be 
said  to  be  dissolved  by  original  agreement  where  it  comes  to  an 
end  by  virtue  of  some  limitation  expressly  or  impliedly  put  upon 
it  by  the  parties  at  the  time  of  its  creation.  There  are  three 
principal  methods  falling  under  this  head :  a.  By  lapse  of  time ; 
6.  By  accomplishment  of  object;  c.  By  the  happening  of  some 
prescribed  event  or  condition. 

§346.  Dissolution  by  lapse  of  time. — a.  Partnership  is 

dissolved  by  lapse  of  time  where  the  period  for  its  continuance 
was  originally  fixed  by  the  agreement  of  the  partners,  and  that 
period  has  elapsed.  It  may  be  continued  afterwards  by  agree- 
ment, but  this  is  practically  the  creation  of  a  new  partnership.4 

The  Uniform  Partnership  Act  provides  for  this  form  of  dis- 
vsolution.6 

§347. Dissolution    by    accomplishment    of    object. — 

&.  Partnership  comes  to  an  end  by  accomplishment  of  its  object 
where  it  was  originally  created  for  a  single  or  temporary  pur- 
pose, or  a  single  transaction,  and  that  purpose  has  been  accom- 
plished or  that  transaction  has  come  to  an  end.  Such  a  partner- 
ship may  be  continued  by  agreement  or  acquiescence,  but 
otherwise  it  comes  to  an  end.6 

The  Uniform  Partnership  Act  provides  for  this  form  of  disso- 
lution.7 

§  348.  Dissolution  upon  a  prescribed  event  or  condition. 

— c.  Partnership  may  also  come  to  end  upon  the  happening  of 
some  event  or  the  existence  of  some  condition  prescribed  in  the 
partnership  agreement  as  one  upon  which  the  partnership  shall 

4  See  Phillips  v.    Boeder    (1866),  W.  840;  Bank  of  Montreal  v.  Page 
18  N.  J.  Eq.  95.  (1881),  98  111.  109;  Cole  v.  Moxley 

5  Sec.  31  (a).  (1878),  12  W.  Va.   730;   Hanna  v. 

6  See   Sims  v.   Smith    (1858),   11  McLaughlin    (1901),    158   Ind.   292, 
Eich.    (S.    C.)    L.    565;    Bohrer    v.  63  N.  E.  475. 

Drake   (1885),  33  Minn.  408,  23  N.          7 Sec.  31  (a), 
Mech.  Part.— 20  305 


§§  349-351]  LAW  OP  PARTNERSHIP 

cease.  This  event  or  condition  may  be  wholly  self -executing,  or 
it  may  merely  present  a  situation  in  which,  by  the  original 
agreement,  one  or  more  partners  may  terminate  the  partnership. 

2.  Dissolution  by  Swbsequent  Act  of  Parties. 

§  349.  In  general. — The  dissolution  of  the  partnership  by  the 
subsequent  act  of  the  parties  may  be  the  result  of  the  act  of  all 
of  the  partners  or  of  one.  That  act  may  be  taken  with  the  mutual 
consent  of  all,  or  it  may  be  sought  to  be  taken  by  one  against 
the  wish  of  the  others. 

§350.  Dissolution  by  act  of  all — Mutual  consent. — Dissolu- 
tion by  the  act  of  all  of  the  partners  finds  its  most  common  form 
in  dissolution  by  mutual  consent.  The  same  persons  who  created 
the  partnership  may  dissolve  it,  and  they  may  do  this  as  well 
where  it  was  originally  created  to  endure  for  a  fixed  period,  not 
yet  expired,  as  where  no  period  was  fixed.8  The  same  result 
will  practically  ensue  where  all  cease  or  refuse  to  carry  on  the 
business  or  all  unite  in  winding  it  up  and  dividing  the  assets.9 

The  Uniform  Partnership  Act  declares  that  there  may  be 
dissolution,  without  violating  the  agreement  between  the  part- 
ners, "By  the  express  will  of  all  the  partners  who  have  not 
assigned  their  interests  or  suffered  them  to  be  charged  for  their 
separate  debts,  either  before  or  after  the  termination  of  any 
specified  term  or  particular  undertaking."10 

§351.  Dissolution  by  act  of  one  partner — Partnerships  at 
will. — The  question  of  the  power  and  right  of  one  partner,  or 
any  number  less  than  all,  to  dissolve  the  partnership  depends 
largely  upon  the  period  for  which  it  was  created.  If  no  term 
or  event  was  fixed  for  its  continuance,  it  is  in  law  a  partnership 

8  See  Bank  v.  Page  (1881),  98  HL          9See  Kennedy  v.  Porter  (1888), 
109;  Wells  v.  Ellis  (1885),  68  Gal.       109  N.  Y.  526,  17  N.  E.  426;  Simp- 
243,  9  Pae.  80;  Ligare  v.  Peacock      son  v.  Miller,  supra. 
(1884),  109  111.  94;   Eichardson  v.          10  Sec.  31  (c). 
Gregory  (1888),  126  111.  166,  18  N. 
E.   777;    Simpson  v.  Miller   (1908), 
51  Ore.  232,  94  Pac.  567. 

306 


DISSOLUTION  OF  PARTNERSHIP  [§§352,353 

at  will,  and  may  be  dissolved  by  any  partner  without  liability 
at  any  time.11 

The  civil,  French  and  Scotch  law  declare  that  the  right  to 
dissolve  even  a  partnership  at  will  is  subject  to  the  conditions 
that  it  shall  be  exercised  in  good  faith  and  at  a  reasonable 
time ; 12  but  these  limitations  do  not  appear  to  be  recognized  by 
the  English  common  law.13 

The  Uniform  Partnership  Act  provides  for  dissolution  "by 
the  express  will  of  any  partner  when  no  definite  term  or  par- 
ticular undertaking  is  specified." 14 

§352.  Dissolution  by  act  of  one  partner — Partnership  on 
condition. — The  partners  may  provide  in  their  partnership 
agreement  or  articles  that  one  partner  shall  have  the  right  to 
dissolve  the  partnership,  though  formed  for  a  definite  period, 
by  giving  a  stipulated  notice  or  upon  the  happening  of  a  speci- 
fied event.  Where  such  a  provision  is  made,  the  partner,  by 
acting  in  pursuance  of  it,  may  lawfully  dissolve  the  partner- 
ship even  though  the  period  for  which  it  otherwise  would  con- 
tinue has  not  expired.15 

§  353.  Dissolution  by  one  partner  when  for  definite  period — 
Dissolution  in  contravention  of  partnership  agreement. — If, 
however,  the  partnership  was  originally  created  to  continue 
for  a  fixed  period,  and  no  provision  is  made  for  its  earlier  dis- 
solution, its  dissolution  by  one  partner  before  that  time  has  ex- 
pired presents  difficulties.  The  conduct  of  the  other  partners 
may  be  such  as  to  justify  a  dissolution, — in  which  case  it  would 

11  See  Walker  v.  Whipple  (1885),  39  Mont.  539,  104  Pac.  683,  25  L.  B. 

58  Mich.  476,  25  N.  W.  472;  Major  A.  (N.  S.)  959.  Compare  Tankersiey 

v.  Todd  (1890),  84  Mich.  85,  47  N.  v.  Norton   (1920),  —  Ark.  — ,  218 

W.  841;  Blake  v.  Sweeting  (1887),  S.    W.    660,    definite    term    implied 

121  111.  67,  12  N.  E.  67 ;  Fletcher  v.  from  circumstances. 

Reed  (1881),  131  Mass.  312,  Burd.  12  See  Howell  v.  Harvey,  supra. 

Gas.  554;  Howell  v.  Harvey  (1843),  13  See  Story  on  Partnership,  §  275. 

5  Ark.  270,  39  Am.  Dec.  376,  Me-  14  Sec.  31  (b). 

chem's  Gas.  448;    Stutt  v.  Lumber  15  See  Swift  v.  Ward   (1890),  80 

Co.  (1906),  98  Minn.  52,  107  N.  W.  Iowa  700,  45  N.  W.  1044,  21  L.  B. 

824;    Blaker   v.    Sands    (1883),    29  A.  302. 
Kan.  551;  Freund  v.  Murray  (1909), 

307 


§§  354,  355]  LAW  OF  PARTNERSHIP 

not  be  in  contravention  of  the  agreement, — to  use  the  language 
of  the  Uniform  Partnership  Act — or  it  may  be  sought  at  the 
mere  will  of  one  partner  without  any  justification — in  which  case 
it  would  be  in  contravention  of  the  agreement.  Although  the 
authorities  are  not  uniform,  the  true  principle  is  probably  found 
in  the  same  distinction  which  was  observed  in  terminating  the 
relation  of  principal  and  agent,  i.  e.,  that  of  the  power  to  revoke 
as  distinguished  from  the  right  to  revoke.16  Every  partner  has 
doubtless  the  power  to  withdraw  from  the  firm  and  terminate 
the  right  of  his  partner  to  further  bind  him,  at  any  time,  even 
before  the  stipulated  period,  and  without  any  other  reason  than 
his  own  will ;  but  when  he  so  revokes  in  violation  of  his  agree- 
ment he  subjects  himself  to  an  action  for  damages  by  his  part- 
ner.17 

§  354.  As  has  been  already  seen,18  courts  rarely  attempt, 

by  decrees  of  specific  performance  or  otherwise,  to  compel  reluc- 
tant persons  to  remain  in  and  perform  the  duties  of  personal  re- 
lations depending  only  upon  their  contract ;  but  will  leave  them 
to  their  actions  at  law  for  breaches  of  the  contract. 

This  does  not  conflict  with  the  rule  that  there  may  be  author- 
ities given  by  way  of  security  or  coupled  with  an  interest 
which  could  not  be  revoked.  These  if  present,  as  they  might 
be,  would  survive  notwithstanding  the  dissolution  of  the  part- 
nership in  other  respects. 

The  Uniform  Partnership  Act  recognizes  the  power  of  one 
partner  to  dissolve  the  partnership  at  any  time,  even  in  con- 
travention of  the  agreement  between  the  partners,  where  the 
circumstances  do  not  permit  a  dissolution  for  any  of  the  reasons 
specified  in  the  act.19  It  also  has  some  special  provisions  for 
safe-guarding  the  interests  of  the  other  partners,  and  subjects 
him  to  some  special  disabilities.20 

§355.  Same  subject — Can  there  be  an  indissoluble  partner- 
ship?— In  a  leading  case  21  upon  this  subject  it  is  said  that  the 

16  See  1  Meehcm  on  Agency,  §  568.          19  Sec.  31  (2). 

17  See  ante,  §209.  20  Sec.  38  (2). 

18  Sec  ante,  §§222-225.  21  Skinner  v.   Dayton    (1822),   19 

308 


DISSOLUTION  OP  PARTNERSHIP  [§  356 

right  of  one  partner  to  dissolve  the  partnership  "is  a  right 
inseparably  incident  to  every  partnership.  There  can  be  no 
such  thing  as  an  indissoluble  partnership.  Every  partner  has 
an  indefeasible  right  to  dissolve  the  partnership,  as  to  all  future 
contracts,  by  publishing  his  own  volition  to  that  effect;  and 
after  such  publication  the  other  members  of  the  firm  have  no 
capacity  to  bind  him  by  any  contract.  Even  where  partners 
covenant  with  each  other  that  the  partnership  shall  continue 
seven  years,  either  partner  may  dissolve  it  the  next  day  by 
proclaiming  his  determination  for  that  purpose;  the  only  con- 
sequence being  that  he  thereby  subjects  himself  to  a  claim  for 
damages  for  a  breach  of  his  covenant.  The  power  given  by 
one  partner  to  another  to  make  joint  contracts  for  them  both 
is  not  only  a  revocable  power,  but  a  man  can  do  no  act  to  divest 
himself  of  the  capacity  to  revoke  it." 

In  another  case,22  in  which  the  foregoing  language  was  ap- 
proved, the  court  said:  "There  may  be  cases  in  which  equity 
would  enjoin  a  dissolution  for  a  time,  when  the  circumstances 
were  such  as  to  make  it  specially  injurious ;  but  no  question  of 
equitable  restraint  arises  here.  When  one  partner  becomes  dis- 
satisfied there  is  commonly  no  legal  policy  to  be  subserved  by 
compelling  a  continuance  of  the  relation,  and  the  fact  that  a 
contract  will  be  broken  by  the  dissolution  is  no  argument  against 
the  right  to  dissolve.  Most  contracts  may  be  broken  at  pleasure, 
subject,  however,  to  responsibility  in  damages.  And  that  re- 
sponsibility would  exist  in  breaking  a  contract  of  partnership 
as  in  other  cases." 

§356. In  the  Supieme  Court  of  the  United  States, 

where  both  of  the  foregoing  cases  were  cited,  it  was  said:  "A 
court  of  equity,  doubtless,  will  not  assist  the  partner  breaking 
his  contract  to  procure  a  dissolution  of  the  partnership,  be- 

Johns.    (N.   Y.)    513,   10   Am.  Dec.  (1868),  58  Pa.  St.  169,  98  Am.  Dec. 

286.      To   same   effect:    Solomon   v.  255;  Karrick  v.  Hannaman  (1897), 

Kirkwood  (1884),  55  Mich.  256,  21  168  U.  S.  328,  18  Sup.  Ct.  135,  42  L. 

N.    W.    336,    Meehem's    Gas.    455;  ed.  484;  Lapenta  v.  Lettieri  (1899), 

Burd.    Gas.    554,    Gilm.    Gas.    589;  72  Conn.  377,  44  Atl.  730,  77  Am. 

Mason  v.  Connell   (1836),  1-  Whart.  St.  E.  315. 

(Pa.)       381;      Slemmer's      Appeal  22  Solomon  v.  Kirkwood,  supra. 

309 


§  357]  LAW   OP  PARTNERSHIP 

cause,  upon  familial*  principles,  a  partner  who  has  not  fully 
and  fairly  performed  the  partnership  agreement  on  his  part  has 
no  standing  in  a  court  of  equity  to  enforce  any  rights  under 
the  agreement.  But,  generally  speaking,  neither  will  it  inter- 
fere at  the  suit  of  the  other  partner  to  prevent  the  dissolution, 
because,  while  it  may  compel  the  execution  of  articles  of  part- 
nership so  as  to  put  the  parties  in  the  same  position  as  if  the 
articles  had  been  executed  as  agreed,  it  will  seldom,  if  ever, 
specifically  compel  subsequent  performance  of  the  contract  by 
either  party,  the  contract  of  partnership  being  of  an  essentially 
personal  character. ' ' 23 

§357.  Same  subject. — But  this  right  of  one  partner  to  dis- 
solve at  will  a  partnership  created  for  a  fixed  period  has  been 
vigorously  denied.  Thus,  Mr.  Justice  Story  has  said:  "When- 
ever a  stipulation  is  positively  made  that  the  partnership  shall 
endure  for  a  fixed  period,  or  for  a  particular  adventure  or  voy- 
age, it  would  seem  to  be  at  once  inequitable  and  injurious  to 
permit  any  partner,  at  his  mere  pleasure,  to  violate  his  engage- 
ment and  thereby  to  jeopard,  if  not  sacrifice,  the  whole  objects 
of  the  partnership;  for  the  success  of  the  whole  undertaking 
may  depend  upon  the  due  accomplishment  of  the  adventure  or 
voyage,  or  the  entire  time  be  required  to  put  the  partnership 
into  beneficial  operation.  It  is  no  answer  to  say  that  such  a 
violation  of  the  engagement  may  entitle  the  injured  partners  to 
compensation  in  damages;  for,  independently  of  the  delay  and 
uncertainty  attendant  upon  any  such  mode  of  redress,  it  is 
obvious  that  the  remedy  may  be,  nay,  must  be,  in  many  cases 
utterly  inadequate  and  unsatisfactory.  If  there  be  any  real 
and  just  ground  for  the  abandonment  of  the  partnership,  a 
court  of  equity  is  competent  to  administer  suitable  redress. 
But  that  is  exceedingly  different  from  the  right  of  the  partner, 
sua  sponte,  from  mere  caprice,  or  at  his  own  pleasure,  to  dis- 
solve the  partnership."24 

These  views,  while  recognized  in  the  English  courts  and  some 
of  the  States,25  have  not  been  generally  approved  in  this  country. 

28  Karrick  v.  JTannaman,  supra.  25  One  of  the  strongest  eases  on 

24  Story  on  Partnership.  §  275.  this    sidp    of    the    question    in    the 

310 


DISSOLUTION  OF  PARTNERSHIP  [§§358,359 

§  358.  Same  subject. — Even,  however,  if  it  be  conceded  that 
the  power  to  dissolve  exists,  its  exercise  by  one  who  is  confessedly 
proceeding  in  flat  violation  of  his  contract  is  not  likely  to  re- 
ceive much  encouragement  or  aid  in  a  court  of  equity;  and 
the  partner  who  attempts  it  may  be  left  to  his  own  resources 
and  such  aid  as  a  court  of  law  will  give  him.  The  unsettled 
condition  of  the  law  upon  the  subject,  therefore  in  some  States, 
and  the  fact  that  a  dissolution,  conceding  the  right  to  make  it, 
may  often  be  impracticable  of  effect  without  judicial  assistance, 
render  it  usually  desirable,  if  not  necessary,  to  have  recourse  to 
a  court  of  equity  when  it  is  sought  to  enforce  the  dissolution 
of  a  partnership  created  for  a  fixed  period.  The  reasons  which 
will  justify  this  proceeding  will  be  discussed  in  later  sections. 

§  359.  Method  of  dissolving  by  act  of  partner. — No  particu- 
lar method  of  dissolving  a  partnership  by  the  act  of  a  partner 
is  necessary.  Any  unequivocal  act  which  shows  his  determina- 
tion not  to  continue  the  relationship  any  longer  will  suffice. 
A  voluntary  sale  or  transfer  of  his  interest  by  one  partner 
usually  works  a  dissolution.28 

In  the  absence  of  such  a  sale,  an  unconditional  notice  of  the 
dissolution  given  by  the  partner  to  his  partners  is  sufficient  as 
between  themselves.  Even  where  the  partnership  was  created 
by  written  instrument,  or  by  instrument  under  seal,  a  dissolu- 
tion by  parol  is  usually  held  sufficient.27 

The  Uniform  Partnership  Act  uses  the  phrase  "by  the  ex- 
press will"  of  any  partner  at  any  time.28 

United  States  is,  doubtless,  Hanna-  Ves.  49.  See,  also,  McMahon  v.  He- 
man  v.  Karrick  (1893),  9  Utah  236,  Clerman  (1877),  10  W.  Va.  419. 
33  Pac.  1039  (reversed  as  to  this  26 See  Blater  v.  Sands  (1882),  29 
point  in  168  U.  S.  328,  18  Sup.  Ct.  Kan.  551;  Wilson  v.  Waugh  (1882), 
135,  42  L.  ed.  484),  which  relied  101  Pa.  233,  Mechem's  Gas.  546; 
chiefly  upon  this  position  of  Story,  Carter  v.  Roland  (1880),  53  Tex. 
and  Lindley;  Ferrero  v.  Buhlmeyer  540. 

(1867),  34  How.   (N.  Y.)   Pr.  33;  27  See  Green  v.  State  Bank  (1890), 

Pearpoint     v.     Graham     (1818),    4  78  Tex.  2;   Swift  v.  Ward   (1890), 

Wash.  C.  C.  232;  Cash  v.  Earnshaw  80  Iowa  700,  45  N.  W.  1044,  11  L. 

(1872),  66  111.  402;  Van  Kuren  v.  E.  A.  302. 

Trenton  Co.    (1861),   13   N.  J.  Eq.  28  Sec.  31  (2). 
302;  Peacock  v.  Peacock  (1809),  16 

311 


§§  360,  361]  LAW  OP  PARTNERSHIP 

II.  DISSOLUTION  BY  HAPPENING  OP  EVENTS. 

§  360.  What  here  included. — In  a  number  of  cases,  partner- 
ship is  deemed  to  come  to  an  end  upon  the  mere  happening  of 
some  event,  the  existence  of  which  ipso  facto  makes  the  further 
continuance  of  the  relation  impossible,  inconsistent,  undesirable 
or  illegal.  "What  the  chief  of  these  events  are  will  be  here  con- 
sidered. 

§  361.  Death  of  a  partner. — Death  of  one  partner  operates  to 
instantly  dissolve  an  ordinary  partnership,  and  this  is  usually 
held  to  be  true  even  though  the  partnership  articles  provide  for 
a  continuance  of  the  partnership  by  his  executors  or  others, 
this  being  deemed  to  be  really,  if  acted  upon,  the  creation  of 
a  new  partnership  rather  than  the  mere  continuation  of  the 
old.89  In  the  case  of  "joint  stock  companies"  or  partnerships 
with  transferable  shares  the  rule  is  often  otherwise.30 

Where  there  were  more  than  two  partners,  the  death  of  one 
not  only  dissolves  the  partnership  as  to  him,  but  it  dissolves 
the  partnership  between  the  survivors  also.31  It  is,  of  course, 

29  See  Vincent  v.  Martin  (1885),  clature  and  partly  a  question  of 
79  Ala.  540;  Exchange  Bank  v.  what  one  is  talking  about.  A  busi- 
Tracy  (1883),  77  Mo.  594;  McGrath  ness  may  in  fact  be  practically  con- 
v.  Cowen  (1898),  57  Ohio  St.  385,  tinuous,  though  the  personnel  of  its 
49  N.  E.  338;  Schmidt  v.  Archer  conductors  may  change.  The  par- 
(1887),  113  Ind.  365,  14  N.  E.  543;  ticular  group  of  persons  who  corn- 
Stewart  v.  Eobinson  (1889),  115  N.  posed  the  partnership  is  unavoidably 
Y.  328,  22  N.  E.  160,  163,  5  L.  R.  A.  changed  when  one  dies,  no  matter 
410.  how  automatically  the  group  may  be 

It   is  undoubtedly   true,  ho'wever,  reconstituted  afterward.    See  Matti- 

that  statements  are  frequently  to  be  son   v.   Farnham    (1890),   44   Minn, 

found  to   the   effect  that  such  pro-  95,  46  N.  W.  347. 

visions  may  operate  to  prevent  dis-  30  See  Willis  v.  Chapman  (1896), 

solution.       See     Gratz     v.     Bayard  68  Vt.  459,  35  Atl.  459;  McNeish  v. 

(1824),    11    Serg.   &  R.    (Pa.)    41;  Oat  Co.  (1884),  57  Vt.  316;  Carter 

Laughlin  v.  Lorenz   (1864),  48  Pa.  v.  McClure  (1897),  98  Tenn.  109,  38 

275,    86    Am.    Dec.    592;     Rand    v.  S.  W.  585,  60  Am.  St.  R.  842,  36  L. 

Wright  (1894),  141  Ind.  226,  39  N.  R.    A.    282;     Tyrrell    v.    Washburn 

E.  447,  Burd.  Gas.  266;  Schmidt  v.  (1863),  88  Mass.   (6  Allen)  466. 

Archer  (1887),  113  Ind.  365,  14  N.  31  See  Hoard  v.  Clum   (1883),  31 

E.  543.  Minn.  186,  17  N.  W.  275,  Mechem's 

It  is  partly  a  matter  of  nomen-  Cas.     444;      Marlett     v.     Jackman 

312 


DISSOLUTION  OP  PARTNERSHIP  [§§  362,  363 

possible  for  the  survivors  to  immediately  form  a  new  partner- 
ship among  themselves,  but  it  is  in  law  and  in  fact  a  new  one. 

No  liability  would  ordinarily  result  as  between  the  partners 
because  the  partnership  was  dissolved  by  death  before  the  ex- 
piration of  the  agreed  term. 

The  Uniform  Partnership  Act  recognizes  this  cause  of  dis- 
solution.32 

§  362.  Bankruptcy  of  a  partner. — Bankruptcy  of  one  partner 
— by  which  is  meant  the  public  or  statutory  condition  as  dis- 
tinguished from  mere  insolvency — operates  to  dissolve  the  part- 
nership.33 Under  the  Uniform  Partnership  Act,  the  partner- 
ship is  dissolved  by  the  bankruptcy  of  any  partner  or  of  the 
partnership.34 

As  in  the  case  of  death,  the  bankruptcy  of  a  partner  which 
dissolves  the  partnership  as  to  him  would  dissolve  it  also  as 
the  remaining  partners  if  there  were  several.35 

§363.  Assignment  or  seizure  of  partner's  interest. — Except 
in  the  case  of  partnerships  having  transferable  shares,  like  joint 
stock  companies  and  mining  partnerships,  the  same  result,  i.  e., 
dissolution,  has  generally  been  thought  to  ensue  from  a  partner's 
assignment  of  all  of  his  property — including  his  partnership 
interests — for  the  benefit  of  his  creditors;  or  from  the  seizure 
and  sale  of  his  interest  at  the  suit  of  his  individual  creditors ; 36 
but  the  Uniform  Partnership  Act  has  changed  this  latter  rule,37 

(1861),    85    Mass.    (3    Allen)    287,  53     Tex.     540;     Wilson    v.    Waugh 

Ames'  Gas.  551,  Burd.  Gas.  547.  (1882),  101  Pa.  233,  Mechem's  Gas. 

32  Sec.  31  (4).  546;  Ogden  v.  Arnot  (1883),  29 

S3  See  Bustis  v.  Bolles  (1888),  146  Hun  (N.  Y.)  146,  Mechem's  Gas. 

Mass.  413,  16  N.  E.  286,  4  Am.  St.  996,    Burd.    Gas.    461;    Morrison   v. 

E.    327,   Mechem's    Gas.    965,   Gilm.  Blodgett    (1836),   8   N.    H.   238,   29 

Gas.  603;   Siegel  v.  Chidsey  (1857),  Am.  Dec.  653. 

28  Pa.   St.   279,   70  Am.  Dec.   124;  37  See  Sec.  27,  quoted  in  note  42. 

Heyman  v.  Heyman  (1904),  210  111.  Sec.   28    (1),   which   provides   for   a 

524,  71  N.  E.  591.  charging  order  against   a   partner's 

34  Sec.  31  (5).  share   at    the    suit   of   his    separate 

35  See    Lewis    v.     United     States  creditor  (see  ante,  §§  148,  149),  may 
(1875),  92  TJ.  S.  618,  23  L.  ed.  513.  be  so  administered  as  to  pay  out  the 

36  See    Carter   v.    Eoland    (1880),  creditor  without  a  dissolution;  while 

313 


364] 


LAW   OF   PARTNERSHIP 


and  such  a  result  certainly  does  not  always  and  necessarily 
ensue.88  A  fortiori  where  all  the  partners  unite  in  making  an 
assignment  of  all  of  the  partnership  property  for  the  benefit 
of  partnership  creditors,  involving  an  entire  suspension  and 
winding  up  of  partnership  affairs,  the  partnership  is  dissolved.39 

§  364.  Voluntary  sale  of  interest  by  one  partner. — The  volun- 
tary and  absolute  sale  of  his  interest  by  one  partner,  either  to 
a  third  person  or  his  partner,  is  also  commonly  said  to  work  a 
dissolution  ipso  facto?0  but  it  does  not  necessarily  and  always  do 
so.41  Such  also  is  the  Uniform  Partnership  Act.42  The  assignee 


Sec.  28  (2)  provides  for  redeeming 
from  such  a  sale  or  bidding  it  in, 
either  with  individual  funds  or  part- 
nership funds  on  certafn  conditions. 

38  A  variety  of  things  may  hap- 
pen. The  assignment  or  sale  may 
not  be  followed  up.  The  debt  may 
be  paid  out  of  other  property.  The 
other  partners  may  consent  to  the 
continuance  of  the  business  notwith- 
standing the  loss  of  his  interest,  etc. 
See  Wood  v.  American  F.  Ins.  Co. 
(1896),  149  N.  Y.  382,  44  N.  E.  80, 
50  Am.  St.  E.  733,  Mechem's  Gas. 
786,  Burd.  Gas.  240;  Riddle  v. 
Whitehill  (1890),  135  U.  S.  621,  34 
L.  ed.  282,  10  S.  Ct.  924. 

In  Helmore  v.  Smith  (1887),  35 
Ch.  Div.  436,  while  one  partner  was 
temporarily  incapacitated  by  illness 
his  interest  in  the  property  was 
seized  upon  execution;  his  copartner 
became  the  purchaser  and  paid  the 
amount  out  of  firm  funds  and 
charged  it  to  the  debtor  partner. 
On  the  latter 's  application  when  re- 
stored to  health,  held,  no  dissolution. 

89  See  Wells  v.  Ellis  (1885),  68 
Gal.  243,  9  Pac.  80. 

40  See  Marquand  v.  N.  Y.  Mfg. 
Co.  (1820),  17  Johns.  (N.  Y.)  525; 
Davis  v.  Megroz  (1893),  55  N.  J.  L. 


427,  26  Atl.  1009;  Miller  v.  Brig- 
ham  (1875),  50  Gal.  615;  Moore  v. 
Steele  (1887),  67  Tex.  435,  3  S.  W. 
448;  Spaunhorst  v.  Link  (1870),  46 
Mo.  197  (sale  to  partner) ;  Barkley 
v.  Tapp  (1882),  87  Ind.  25;  Allen  v. 
Logan  (1888),  96  Mo.  591,  10  S.  W. 
149  (sale  to  a  stranger) ;  Simpson  v. 
Miller  (1908),  51  Oreg.  232,  94  Pae. 
567  (sale  to  partner). 

«  See  Taft  v.  Buffum  (1833),  31 
Mass.  (14  Pick.)  322;  Waller  v. 
Davis  (1882),  59  Iowa  103,  12  N. 
W.  798.  Of  course,  a  mere  mort- 
gage of  his  interest  by  one  partner 
does  not  at  once  necessarily  dissolve 
the  partnership. 

In  case  of  mortgage  by  one  part- 
ner to  another  of  his  interest,  see 
Monroe  v.  Hamilton  (1877),  60  Ala. 
226,  Burd.  Gas.  306. 

42  The  Uniform  Partnership  Act, 
sec.  27,  provides:  "(1)  A  convey- 
ance by  a  partner  of  his  interest  in 
the  partnership  does  not  of  itself 
dissolve  the  partnership,  nor,  as 
against  the  other  partners  in  the  ab- 
sence of  agreement,  entitle  the  as- 
signee, during  the  continuance  of 
the  partnership,  to  interfere  in  the 
management  or  administration  of  the 
partnership  business  or  affairs,  or  to 


314 


DISSOLUTION  OF  PARTNERSHIP  [§§  365,  366 

of  the  interest,  of  course,  does  not  automatically  become  a  part- 
ner: the  delectus  personarum  prevents  that,  as  does  also  the 
Uniform  Partnership  Act;  he  is  at  most  a  tenant  in  common. 
But  he  has  a  right  to  get  out  the  value  of  what  he  has  pur- 
chased.43 The  other  partners  cannot  ordinarily  be  expected  to 
retain  as  a  partner  one  who  has  no  longer  any  pecuniary  interest 
in  the  business,  and  who  would  usually  not  be  liable  for  future 
debts.  They  have  therefore  usually  a  strong  motive  to  treat 
the  partnership  at  an  end,  and  would  ordinarily  have  an  un- 
questioned right  to  do  so.  But  it  is  not  impossible  for  them  to 
waive  the  objections  and  continue  the  relation.  If  the  partner 
in  question  not  only  sells  out  but  goes  out,  a  dissolution  will 
result. 

A  sale  of  his  interest  by  a  partner  in  a  partnership  having 
transferable  shares  of  course  stands  upon  a  different  footing. 

§365.  Insanity  of  a  partner. — Although  opinions  have  dif- 
fered upon  the  subject,  and  there  is  some  authority  for  saying 
that  an  adjudication  of  insanity  ipso  facto  works  a  dissolution,44 
the  rule  seems  now  to  be  settled  that  the  insanity  of  one  partner 
does  not  of  itself  work  a  dissolution  of  the  firm,  but  may  con- 
stitute sufficient  ground  to  justify  a  court  in  decreeing  a  dis- 
solution.45 

§366.  Marriage  of  partner. — Marriage  of  a  female  partner 
to  a  non-partner,  at  common  law,  but  not  under  most  of  the 
modern  statutes,  would  operate  to  dissolve  the  partnership.  Even 

require  any  information  or  account  43  See    the    Uniform    Partnership 

of   partnership    transactions,   or   to  Act,  Sec.  27,  above, 

inspect  the  partnership  books;   but  44 See  Isler  v.  Baker   (1845),  25 

it  merely  entitles  the  assignee  to  re-  Tenn.   (6  Humph.)   85. 

ceive  in  accordance  with  his  contract  45  See       Raymond      v.      Vaughn 

the  profits  to   which   the   assigning  (1889),  128  111.  256,  21  N.  E.  566, 

partner  would  otherwise  be  entitled.  15  Am.  St.  E.  112,  4  L.  E.  A.  440, 

(2)  In  case  of  a  dissolution  of  the  Gilm.  Gas.  595.    Compare,  incapacity 

partnership,  the  assignee  is  entitled  by    paralysis,     Barclay     v.     Barrie 

to  receive  his  assignor 's  interest  and  (1913),   209   N.   Y.   40,   102  N.   E. 

may   require   an   account   from   the  602,  47  L.  E.  A.  (N.  S.)  839,  Ann. 

date  only  of  the  last  account  agreed  Gas.  1913  D  1143. 
to  by  all  the  partners." 

315 


§§  367-369]  LAW  OF  PARTNERSHIP 

under  such  statutes,  if  a  male  and  a  female  partner  intermarry 
the  partnership  would,  in  many  states,  be  thereby  dissolved.46 

§367.  Guardianship  of  a  partner. — Guardianship  of  one 
partner,  by  virtue  of  which  the  management  of  his  property  is 
taken  from  him,  operates  probably  to  dissolve  the  partnership, 
and  at  all  events  would,  like  insanity,  be  a  ground  for  decreeing 
a  dissolution.47 

§368.  Expulsion  of  a  partner. — Partners  have  no  inherent 

right  to  expel  another,  no  matter  by  what  majority;  but  it  is 
competent  to  provide  in  the  partnership  articles  for  the  con- 
pulsory  withdrawal  of  a  partner  upon  conditions  prescribed. 
Such  provisions  are  common  in  English  practice,  but  rare  in 
this  country.  They  would  need  to  be  explicit,  and  must  be  at 
least  substantially  pursued.  The  Uniform  Partnership  Act48 
declares  that  dissolution  is  caused  ''by  the  expulsion  of  any 
partner  from  the  business  ~bona  fide  in  accordance  with  such 
a  power  conferred  by  the  agreement  between  the  partners." 

§  369.  War. — War  between  the  countries  of  which  the  part- 
ners are  respectively  citizens  at  least  suspends,  and  ordinarily 
works  a  dissolution  of,  a  commercial  partnership.49  The  part- 
ners are  now  public  enemies  of  each  other  and  all  commercial 
dealings  between  them  are  unlawful. 

So  a  war  in  the  country  in  which  the  business  is  to  be  con- 
ducted, even  though  the  partners  themselves  are  not  citizens  of 
enemy  countries,  may  make  impossible  or  illegal  the  further 
prosecution  of  the  business  in  that  country. 

46  See  Brown  v.  Chancellor  (1884),  chem's     Cas.     962;     Stevenson     v. 
61  Tex.  437;  Bassett  v.  Shepardson  Aktiengesellsehaft,  etc.  [1917],  1  K. 
(1883),  52  Mich.  3,  17  N.  W.  217,  B.  842,  7  Br.  Eul.  Cas.  600;  Wood  v. 
Burd.    Cas.    553;    Little    v.    Hazlett  Wilder  (1870),  43  N.  Y.  164,  3  Am. 
(1900),   197   Pa.   591,  47  Atl.   855.  Rep.    684;     Hubbard    v.    Matthews 
See,  also,  ante,  §  52.  (1873),  54  N.  Y.  43,  13  Am.  Rep. 

47  See     Parsons    on    Partnership,  562;       Griswold      v.      Waddington 
§303.  (1818),  16  Johns.  (N.  Y.)  438,  491, 

48  Sec.  31  (d).  15  id.  57,  Burd.  Cas.  544,  Gilm.  Cas. 

49  See   Bank    of   New   Orleans   v.  600. 
Matthews  (1872),  49  N.  Y.  12,  Me- 

316 


DISSOLUTION  OF  PARTNERSHIP  [§§  370-372 

§370.  Illegality. — An  event,  like  a  change  of  status  or  a 
change  of  law,  which  made  illegal  the  further  prosecution  of  a 
business  formerly  legal,  or  which  made  it  illegal  for  the  partic- 
ular partners  to  continue  to  carry  on  a  business  which  it  was 
formerly  lawful  for  them  to  conduct,  would  ordinarily  dissolve 
the  partnership.60 
'  The  Uniform  Partnership  Act  is  to  the  same  effect.61 

§371.  Happening  of  a  stipulated  event. — So  the  mere  hap- 
pening of  some  particular  event  which  the  parties  by  their  con- 
tract have  specified  may,  by  the  terms  of  that  contract,  either 
ipso  facto  dissolve  the  partnership,62  or  furnish  ground  for  its 
dissolution  by  the  act  of  a  partner. 

§  372.  Reorganization — Incorporation. — A  partnership  is  not 

necessarily  terminated  merely  by  the  fact  that  the  members  of 
it  form  another  partnership  or  become  members  of  a  corpora- 
tion.63 If  that  particular  partnership  were  reconstituted  in 
such  a  way  as  to  work  a  fundamental  change  in  it — as  if  new 
members  were  admitted,  the  purpose  changed,  and  the  like, — 
there  would  doubtless  result  a  dissolution  of  the  partnership. 
So  if  that  particular  business  were  incorporated,  a  dissolution 
of  the  partnership  would  usually  result.64  So  it  would,  in  fact, 
if  the  capital,  property  and  business  of  the  partnership  were 
transferred  to  the  corporation  and  the  partnership  enterprise 
was  abandoned.65 

50 See  Justice  v.  Lairy  (1898),  19  mercial  Corporation  (1904),  111  111. 

Ind.  App.  272,  49  N.  E.  459,  65  Am.  App.  647;   Seufert  v.  Gille   (1910), 

St.  R.  405,  holding  that  where  the  230  Mo.  453,  131  S.  W.  102,  31  L. 

statute    makes    it    unlawful    for    a  E.   A.    (N.    S.)    471;    Southwick   v. 

judge  to  practice  law,  an   existing  Allen  (1839),  11  Vt.  75;  First  Nat. 

law  firm  is  dissolved  if  one  of  the  Bank   v.    Conway    (1886),    67   Wis. 

members  later  accepts  the  office  of  210,  30  N.  W.  215 ;  Pearce  v.  Suther- 

judge.  land   (1908),  90   C.  C.  A.  519,  164 

51  See  sec.  31  (3).  Fed.  609. 

52  See      Smith      v.     Vandenburg  54  See  Hennessy  v.  Griggs  (1890), 
(1867),  46  111.  34.  1  N.  Dak.  52,  44  N.  W.  1010. 

53  See  Goddard  v.  Pratt   (1835),  See,     also,     Cavasso     v.     Downey 
33  Mass.   (16  Pick.)   412;  Howe  v.  (1920),  —  Cal.  App.  — ,  188  Pac. 
Thayer  (1835),  34  Mass.  (17  Pick.)  594. 

91;    Weise  v.   Gray's  Harbor  Com-          55  See     Coggswell,     etc.,     Co.     v. 

317 


§  373]  LAW  OP  PARTNERSHIP 

It  is,  of  course,  a  different  question,  reserved  for  the  following 
chapter,  what  notice,  if  any,  of  such  a  change  must  be  given, 
and  to  whom. 

III..  DISSOLUTION  BY  JUDICIAL  DECREE. 

§373.  Declaring  void. — Before  taking  up  the  question  of 
dissolution  by  decree,  the  present  seems  a  convenient  place  for 
mentioning  a  remedy  in  the  same  line,  but  of  far  more  extensive 
effect.  Thus,  instead  of  dissolving  the  partnership  and  thereby 
terminating  it  from  the  date  of  the  decree,  a  court  of  equity 
may  find  sufficient  ground  for  rescinding  the  contract  of  part- 
nership altogether  and  declaring  the  partnership  void  db  initio. 
This  may  be  done  where  one  partner  has  been  induced  through 
fraud,  deception  or  oppression  to  enter  into  the  partnership  in 
the  first  instance.56  "Where  a  person  is  induced,"  says  Mr. 
Justice  Lindley,67  "by  the  false  representations  of  others  to 
become  a  partner  with  them,  the  court  will  rescind  the  contract 
of  partnership  at  his  instance;  and  will  compel  them  to  repay 
him  whatever  he  may  have  paid  them,  with  interest,  and  to 
indemnify  him  against  all  the  debts  and  liabilities  of  the  part- 
nership, and,  if  the  defendants  have  been  guilty  of  fraud,  against 
all  claims  and  demands  to  which  he  may  have  become  subject 
by  reason  of  his  having  entered  into  partnership  with  them,  he 
on  the  other  hand  accounting  to  them  for  what  he  may  have 
received  since  his  entry  into  the  concern. ' ' 

The  Uniform  Partnership  Act  contains  specific  provisions  as 

Coggswell  (1898),  —  N.  J.  Eq.  — ,  v.    Stewart     (1850),    10    B.    Mon. 

40  Atl.  213.  (Ky.)  429;  Smith  v.  Everett  (1879), 

56  See      Adam      v.      Newbigging  126  Mass.  304,  Gilm.  Cas.  608;  Kich- 

(1888),    13    App.    Cas.    308;    New-  ards  v.  Todd  (1879),  127  Mass.  167; 

bigging  v.  Adam    (1886),  L.  E.  34  Grossman     v.     Lewis     (1917),    226 

Ch.    Div.    582;    Mycock    v.    Beatson  Mass.  163,  115  N.  E.  236;   Harlow 

(1879),  13   Ch.  Div.   384;   Fogg  v.  v.  La  Brum  (1897),  151  N.  Y.  278, 

Johnston    (1855),   27   Ala.   432,   62  45  N.  E.  859;   Gathright  v.  Fulton 

Am.    Dec.    771;    Howell   v.    Harvey  (1917),  122  Va.  17,  94  S.  E.  191. 
(1843),   5   Ark.    270,   39   Am.   Dee.          67  Lindley  on  Partnership,  vol.  II 

376,   Meehem's   Cas.   448;    Oteri  v.  ( E  well 's  ed.),  482. 
Sealzo  (1891),  145  U.  S.  578;  Hynes 

318 


DISSOLUTION   OF   PARTNERSHIP  [§§374,375 

to  the  rights  of  the  defrauded  partner  which  will  be  found  in 
the  footnote.58 

§374.  Dissolving  in  equity. — Many  causes,  however,  may 
exist  which  will  justify  a  dissolution  of  the  firm  which  would 
not  suffice  to  render  the  partnership  void  ab  initio. 

Of  the  causes  for  which  a  court  will  thus  decree  a  dissolution 
several  examples  may  be  given.  The  courts  of  law,  it  may  be 
noticed,  have  no  jurisdiction  for  this  purpose,  and  the  relief 
can  be  sought  only  in  equity.  The  grounds  for  the  intervention 
of  the  court  are  usually  acts  occurring  since  the  formation  of 
the  partnership,  but  they  may  be  acts  or  events  preceding  its 
formation.  The  occasion  for  seeking  a  dissolution  in  a  court 
of  equity  arises  usually  only  in  those  cases  in  which  it  was  to 
continue  for  a  definite  term  not  yet  expired,  because,  as  has 
been  seen,  a  partnership  at  will  merely  is  ordinarily  dissolvable 
at  any  time  by  the  mere  act  of  the  parties.69 

The  fact  that  the  articles  provide  for  dissolution  upon  notice 
given  by  one  partner  to  the  other  does  not  prevent  an  applica- 
tion to  a  court  of  equity  for  dissolution.60 

§  375.  Causes  for  dissolution — Fraud. — Fraud  in  the  creation 
of  a  partnership,  as  has  been  seen,  may  be  a  sufficient  ground 
for  a  rescission  of  the  contract,  but  it  may  also  be  treated  as 
a  reason  for  decreeing  a  dissolution.61 

58  See.  39.    "Where  a  partnership  (b)  To  stand,  after  all  liabilities 

contract  is  rescinded  on  the  ground  to  third  persons  have  been  satisfied, 

of  the  fraud  or  misrepresentation  of  in  the  place  of  the  creditors  of  the 

one  of  the  parties  thereto,  the  party  partnership  for  any  payments  made 

entitled  to  rescind  is,  without  preju-  by  him  in  respect  of  the  partnership 

dice  to  any  other  right,  entitled —  liabilities;  and 

(a)  To  a  lien  on,  or  right  of  reten-  (c)  To  be  indemnified  by  the  per- 

tion  of,  the  surplus  of  the  partner-  son  guilty  of  the  fraud  or  making 

ship  property,  after  satisfying  the  the  representation  against  all  debts 

partnership  liabilities  to  third  per-  and  liabilities  of  the  partnership." 

sons,  for  any  sum  of  money  paid  by  59  See  ante,  §  351. 

him  for  the  purchase  of  an  interest  60 Adams     v.     Shewalter     (1894), 

in  the  partnership  and  for  any  cap-  139  Ind.  178,  38  N.  E.  607. 

ital  or  advances  contributed  by  him;  61  See  Oteri  v.  Scalzo  (1891),  145 

and  U.  S,  578,  12  Sup.  Ct.  895,  36  L.  ed. 

319 


§§  376-378]  LAW  OP  PARTNERSHIP 

§376. -Insanity  or  incapacity  of  partner. — The  insanity 

or  other  physical  incapacity  of  one  partner,  while  not  usually 
sufficient  of  itself,  as  has  been  seen,  to  terminate  the  partner- 
ship as  matter  of  law,  will,  if  of  such  a  character  as  to  perma- 
nently disable  the  partner  afflicted  from  performing  the  duties 
of  the  partnership,  be  sufficient  ground  for  decreeing  a  dissolu- 
tion.62 

§377.  Misconduct  of  a  partner.  —  The  misconduct  of 

one  partner  (not  the  one  praying  for  relief),  if  of  such  a  kind 
and  degree  as  to  render  the  further  prosecution  of  the  partner- 
ship inexpedient,  injurious  or  impossible,  may  be  ground  for 
decreeing  its  dissolution.  Courts  will  not  interfere  upon  every 
disagreement  between  the  partners,  nor  ' '  enter*  into  a  consider- 
ation of  mere  partnership  squabbles, ' ' 6S  but  they  will  interfere 
where  the  misconduct  of  one  partner  or  the  dissension  between 
the  parties  is  so  serious  as  t6  endanger  the  prosperity  of  the 
firm  or  destroy  the  confidence  which  must  exist  between  partners. 
Thus,  abandonment  of  the  business  by  one  partner,  his  persistent 
violation  of  the  articles,  excluding  his  copartner  from  participa- 
tion, repudiating  his  interest,  dishonesty,  gross  misconduct,  ha- 
bitual drunkenness,  and  the  Ijke,  have  been  held  sufficient.64 

§378.  Must  not  be  misconduct  of  partner  seeking1  dis- 
solution.— But  the  partner  who  is  himself  at  fault  will  not  be 

824;  Rosenstein  v.  Burns  (1882),  66  111.  402,  Gilm.  Cas.  605;  Gerard 

41  Fed.  841;  White  v.  Smith  (1897),  v.  Gateau  (1876),  84  111.  121,  25 

63  Ark.  513,  39  S.  W.  555.  Am.  Rep.  438,  Mechem's  Cas.  460. 

62  See  Barclay  v.  Barrie  (1913),  64  See  Seighortner  v.  Weissenborn 

209  N.  Y.  40,  102  N.  E.  602,  47  L.  (1869),  20  N.  J.  Eq.  172;  Rosen- 

B,  A.  (N.  S.)  839,  and  note,  Ann.  stein  v.  Burns  (1882),  41  Fed.  841, 

Cas.  1913  D  1143;  Raymond  v.  Burd.  Cas.  557;  New  v.  Wright 

Vaughn  (1889),  128  111.  256,  21  N.  (1870),  44  Miss.  202,  Mechem's  Cas. 

E.  566,  15  Am.  St.  R.  112,  4  L.  R.  319;  Moore  v.  Price  (1896),  116 

A.  440;  Jurgens  v.  Ittmann  (1895),  Ala.  247,  22  So.  531;  Groth  v.  Pay- 

47  La.  Ann.  367,  16  So.  952,  Burd.  ment  (1890),  79  Mich.  290,  44  N.  W. 

Cas.  558;  Sayer  v.  Bennet  (1783),  611;  Cottle  v.  Leitch  (1868),  35  Cal. 

1  Cox  107;  Whitwell  v.  Arthur  434;  Holladay  v.  Elliott  (1879),  8 

(1865),  35  Beav.  140;  Jones  v.  Oreg.  84;  Harrison  v.  Tennant 

Noy  (1833),  2  M.  &  K.  125.  (1856),  21  Beav.  482;  Essel  v.  Hay- 

68See  Cash  v.  Earnshaw   (1872),  ward  (1860),  30  Beav.  158. 

320 


DISSOLUTION  OF  PARTNERSHIP  [§§  379-381 

permitted  to  make  use  of  his  own  misconduct  to  secure  a  dis- 
solution. "A  party  who  is  the  author  of  the  ill-feeling  between 
himself  and  his  partners,"  said  the  court  in  one  case,66  "ought 
not  to  be  permitted  to  make  the  relation  he  has  induced  the 
ground  of  a  dissolution  of  the  partnership.  His  conduct  may 
have  been  taken  with  a  view  to  that  very  result,  and  it  would 
be  inequitable  to  allow  him  advantage  from  his  own  wrongful 
acts.  It  would  allow  one  partner,  at  his  election,  to  put  an  end 
to  his  own  deliberate  contract,  when  the  other  had  been  guilty 
of  no  wrongful  act  or  omission  of  duty. ' ' 

§379.  Irreconcilable  discord.— Even  though  both  par- 
ties are  at  fault — and  often  without  attempting  to  appraise 
their  respective  demerits — it  may  be  found  that  such  a  condi- 
tion of  irreconcilable  discord  and  dissension  has  developed  be- 
tween the  partners  as  to  make  any  reasonable  and  successful 
prosecution  of  the  business  impossible ;  and  the  court  may  decree 
a  dissolution  on  that  ground.66 

§  380.  Impossibility  of  success. — So,  though  there  be  no 

misconduct,  if  the  further  prosecution  of  the  partnership  with 
profit  or  success  has  become  impossible  or  impracticable,  if  its 
purpose  or  object  has  become  unattainable,  if  it  is  found  that 
the  scheme  or  theory  upon  which  the  partnership  was  based 
was  illusory  or  erroneous, — in  these  and  like  cases  the  court  may 
decree  its  dissolution,  as  it  is  not  to  the  advantage  of  any  one 
that  the  business  should  be  continued  under  such  circumstances.67 

§  381.  Under  Uniform  Partnership  Act. — The  provisions 

of  the  Uniform  Partnership  Act  are  substantially  the  same  as 
those  already  existing  under  the  general  law,68  and  it  is  assumed 

65  Gerard    v.    Gateau    (1876),    84  41  Fed.  841,  Burd.  Gas.  557;  Holla- 
Ill.  121,  25  Am.  Eep.  438,  Mechem's  day  v.  Elliott    (1878),  8  Oreg.  84; 
Gas.  460.     See,  also,  Fairthorne  v.  Willis  v.   Chapman    (1896),   68   Vt. 
Weston  (1844),  3  Hare  387.  459,  35  Atl.  459;   Jennings  v.  Bad- 

66  See  Singer  v.  Heller  (1876),  40  deley  (1856),  3  K.  &  J.  78. 

Wis.  544;  Whalen  v.  Stephens  68  Sec.  32  (1)  "On  application  by 
(1901),  193  111.  121,  61  N.  E.  921.  or  for  a  partner  the  court  shall  de- 

67  See  Rosenstein  v.  Burns  (1882),      cree  a  dissolution  whenever; 

Mech.  Part.— 21  321 


§382] 


that  they  would  be  subject  to  the  same  qualifications,  e.  g.,  that 
the  partner  by  or  for  whom  the  application  is  made  shall  not 
be  the  one  guilty  of  the  misconduct. 

This  Act  also  provides  .for  dissolution  by  decree  of  court  on 
the  application  of  the  purchaser  of  a  partner's  interest,69  under 
conditions  which  doubtless  represent  existing  law. 

§382.  Receivership  in  these  cases. — As  has  already  been 
seen,70  dissolution  by  judicial  decree  offers  also  the  occasion  in 
many  cases  for  the  appointment  of  a  receiver,  and  other  forms 
of  incidental  relief. 


(a)  A  partner  has  been  declared 
a  lunatic  in  any  judicial  proceed- 
ing or  is  shown  to  be  of  unsound 
mind. 

(&)  A  partner  becomes  in  any 
other  way  incapable  of  performing 
his  part  of  the  partnership  contract. 

(c)  A  partner  has  been  guilty  of 
such    conduct    as    tends    to    affect 
prejudicially  the  carrying  on  of  the 
business. 

(d)  A  partner  wilfully  or  persist- 
ently commits  a  breach  of  the  part- 
nership  agreement   or   otherwise   so 
conducts  himself  in  matters  relating 
to  the  partnership  business  that  it 
is    not    reasonably    practicable    to 


carry  on  the  business  in  partnership 
with  him. 

(e)  The  business  of  the  partner- 
ship can  only  be  carried  on  at  a  loss. 

(/)  Other  circumstances  render  a 
dissolution  equitable. ' ' 

69  Sec.  32    (2)    "On  the  applica- 
tion of  the  purchaser  of  a  partner's 
interest  under  sections  28  or  29: 

(a)  After  the  termination  of  the 
specified  term  or  particular  under- 
taking. 

(ft)  At  any  time  if  the  partner- 
ship was  a  partnership  at  will  when 
the  interest  was  assigned  or  when 
the  charging  order  was  issued." 

70  See  ante,  §231. 


322 


CHAPTER  XVI. 


OF  NOTICE  OF  THE  DISSOLUTION. 


§  390.  To  whom  notice  req aired. 

391,  392.  How  notice  given — 1.  To 
those  who  have  had  deal- 
ings with  the  firm. 

393,  394.  How  notice  given— 2.  To 
those  who  have  not  had 
dealings  with  the  firm. 

395.  Knowledge  —  Construct- 
ive notice. 

396.  Who     should     give     notice — 

Actual  and, ostensible  part- 
ners. 

397.  Dormant       and       secret 

partners. 

398.  Effect  of  not  giving  notice. 


§  383.  In  general. 

I.  NOTICE  TO  PARTNERS. 

384.  On    dissolution   by   act   of   a 

partner. 

385.  On   dissolution  by  happening 

of  events. 

386.  Under    Uniform    Partnership 

Act. 

II.  NOTICE  TO  THIRD  PERSONS. 

387.  The    necessity    of    notice    to 

them. 

388.  In    what   cases   notice   is   re- 

quired— Not   on   dissolution 
by  mere  operation  of  law. 

389.  Eequired    on    dissolution 

by     or     through     act     of 
parties. 


§383.  In  general. — The  formation  of  a  partnership,  as  has 
been  seen,  results  in  the  creation  of  a  relationship  between  the 
parties  by  virtue  of  which  they  acquire  certain  rights  and  privi- 
leges, and  come  under  certain  duties  and  obligations,  with  re- 
spect of  one  another;  and  also  confer  upon  each  other  certain 
authority  to  enter  into  business  relations  with  third  persons  by 
which  all  of  the  partners  are  to  be  bound.  If  now  this  relation- 
ship is  to  be  broken  up,  it  is  obvious  that  notice  of  that  fact 
(where  not  self-evident  or  otherwise  declaratory)  should  be 
brought  home  both  to  the  partners  themselves  and  also  to  the 
third  persons  who  have  been  invited  to  rely  on  the  authorities 
resulting  from  it.  There  must  be  considered,  therefore,  the 
necessity  of  notice :  I.  To  the  partners  themselves ;  and  II.  To 
non-partners. 

323 


§§  384-386]    .  LAW  OF  PARTNERSHIP 

I.  NOTICE  TO  PARTNERS. 

§  384.  On  dissolution  by  act  of  a  partner. — Where  the  part- 
nership is  terminated  by  the  act  of  a  parther,  whether  it  be  a 
partnership  at  will  or  one  for  a  definite  time,  it  is  ordinarily 
incumbent  upon  such  partner  to  notify  his  copartners  of  that 
fact,  and  the  termination  would  ordinarily  not  be  deemed  legally 
effected  until  such  notice  was  given.1  Notice  would  ordinarily 
be  necessary  to  terminate  the  agency  of  the  other  partners  to 
bind  the  one  seeking  to  dissolve  the  partnership.  His  secret 
intention,  concealed  in  his  own  mind,  or  his  purely  ex  parte  acts, 
would  have  no  effect. 

In  many  cases,  the  act  itself  by  which  the  relationship  is  termi- 
nated would  ipso  facto  give  notice,  as,  e.  g.,  where  he  sells  out 
to  his  copartners,  or  sells  to  a  third  person  whom  the  other  part- 
ners contemporaneously  admit  to  the  partnership  in  his  place. 

§385.  On  dissolution  by  happening  of  events.  —  "Where  the 
partnership  is  dissolved  by  one  of  those  events  which,  like  death, 
bankruptcy,  war,  change  of  law,  and  the  like,  operate  to  termi- 
nate the  ordinary  partnership,  no  notice  of  that  fact  could 
usually  be  required  from  one  partner  to  another,  because  ordi- 
narily one  would  have  as  much  opportunity  for  notice  in  fact 
as  another.  There  might  well  be  cases,  however,  in  which  one 
partner,  who  had  actual  notice  of  such  a  fact  which  he  knew 
his  copartner  did  not  have,  would  be  deemed  to  be  under  a  legal 
duty  to  inform  him. 

§  386.  Under  Uniform  Partnership  Act. — With  respect  of  the 
right  of  a  partner  to  contribution  from  his  copartners  for  lia- 

1  Thus,  in  Eagle  v.  Bucher  (1856),  of  the  firm.  They  should  be  advised 
6  Ohio  St.  295,  67  Am.  Dec.  342,  it  of  the  new  relations  created  by  the 
is  said :  ' '  That  a  partnership  may  withdrawal  of  a  member,  or  a  trans- 
be  dissolved  by  the  act  of  one  of  fer  of  his  interest  in  the  concern, 
the  partners  we  do  not  *  *  *  Their  future  relations  toward  each 
intend  to  impugn.  That  is  too  well  other,  and  their  pursuit  of  the  par- 
settled  to  be  now  questioned.  But  ticular  enterprise,  depend  on  the  ac- 
to  effect  that  purpose,  the  act  must  quisition  of  such  knowledge."  See, 
be  done  with  a  view  to  its  accom-  also,  Abbot  v.  Johnson  (1855),  32 
plishment.  It  should  be  communi-  N.  H.  9;  Jones  v.  Lloyd  (1874),  L. 
cated  at  once  to  the  other  members  R.  18  Eq.  265,  271. 

324 


NOTICE  OF  DISSOLUTION  [§§  387,  388 

bilities  or  expenses  incurred  by  him  after  dissolution,  the  Uni- 
form Partnership  Act,1  confessedly  to  some  extent  changing  the 
present  law,  provides  that  "where  the  dissolution  is  caused  by 
the  act,  death  or  bankruptcy  of  a  partner,  each  partner  is  liable 
to  his  copartners  for  his  share  of  any  liability  created  by  any 
partner  acting  for  the  partnership  as  if  the  partnership  had  not 
been  dissolved,  unless 

(a)  The  dissolution  being  by  act  of  any  partner,  the  partner 
acting  for  the  partnership  had  knowledge  of  the  dissolution,  or 

(&)  The  dissolution  being  by  the  death  or  bankruptcy  of  a 
partner,  the  partner  acting  for  the  partnership  had  knowledge 
or  notice  of  the  death  or  bankruptcy"  as  those  terms  are  defined 
by  the  Act. 

II.  NOTICE  TO  THIRD  PERSONS. 

§387.  The  necessity  of  notice  to  them. — The  creation  of  a 
partnership  and  the  transaction  of  its  business  are  notice  to  the 
public  that  a  relation  has  been  entered  into  to  which  the  law 
attaches  certain  incidents  and  liabilities.  As  a  business  venture 
it  is  ordinarily  an  invitation  to  third  persons  to  deal  upon  the 
credit  of  the  persons  and  the  funds  assembled  for  that  purpose 
in  the  partnership.  It  seeks  to  establish  good-will  and  habits 
of  dealing.  To  be  successful,  the  invitation  to  rely  must  usually 
be  a  continuing  one.  If  this  relation  is  terminated,  it  would 
seem  to  be  a  natural  consequence  that  some  notice  of  the  fact 
should  also  be  given,  if  it  is  desired  to  bring  those  incidents 
and  liabilities  to  an  end.  And  notice  is  required  by  law  in 
many  cases.  We  are  now  to  consider  when  notice  is  required 
to  third  persons,  to  whom,  and  how  it  may  be  given. 

§388.  In  what  cases  notice  is  required — Not  on  dissolution 
by  mere  operation  of  law. — As  has  been  seen,  the  dissolution 
may  result  either  from  the  operation  of  the  law  or  by  the  act 
of  the  parties.  The  causes  which  will  operate  to  dissolve  the 
partnership  by  mere  operation  of  law  have  been  considered,  and 
it  is  obvious  that  the  existence  of  these  causes  is  usually  accom- 

1  See.  34. 

325 


§388] 


LAW   OF   PARTNERSHIP 


panied  by  facts  and  circumstances  which  must  of  themselves 
give  publicity  to  the  event.  Thus,  the  fact  that  one  of  the  part- 
ners has  died  is  usually,  if  not  always,  accompanied  by  circum- 
stances which  must  give  publicity  to  the  fact.  The  same  is  true 
of  the  bankruptcy  of  a  partner,  or  the  declaration  of  war  between 
the  countries  of  which  partners  respectively  are  citizens.  More- 
over, upon  such  death  or  bankruptcy  new  parties  acquire  in- 
terests in  the  property  of  the  decedent  or  the  bankrupt  which 
can  not  be  affected  by  the  future  acts  of  the  former  partners.  The 
result  of  this  necessary  and  inherent  publicity  is  the  general 
rule  that  no  notice  is  required  where  the  partnership  is  dissolved 
upon  the  happening  of  one  of  the  events  which  terminate  a 
partnership  by  mere  operation  of  law.2  Such  has,  in  fact,  been 
held  to  be  the  rule  in  the  case  of  dissolution  by  death,  bank- 
ruptcy, war,  and  the  marriage  of  a  female  partner.  Change  in 
the  law,  making  the  partnership  thereafter  illegal,  must  stand 
upon  the  same  footing.  Such,  also,  it  is  commonly  said,  is  the 
case  of  dissolution  by  judicial  decree:  third  persons  must  take 


2  See  Griswold  v.  Waddington 
(1818),  15  Johns.  (N.  Y.)  57,  16  id. 
438;  Marlett  v.  Jackman  (1861),  85 
Mass.  (3  Allen)  287;  Bank  v.  Mat- 
thews (1872),  49  N.  Y.  12,  Mechem 's 
Cas.  962;  Eustis  v.  Bolles  (1888), 
146  Mass.  413,  4  Am.  St.  Rep.  327, 
16  N.  E.  286,  Mechem 's  Cas.  965. 
In  this  last  ease  it  is  said:  "The 
bankruptcy,  like  the  death  of  a  part- 
ner, dissolves  the  partnership;  and, 
as  it  is  a  public  and  notorious  pro- 
ceeding, all  creditors  are  bound  to 
take  notice  of  it,  and  no  further  no- 
tice need  be  given.  The  publication 
of  bankruptcy  or  insolvency  pro- 
ceedings is  legal  notice  to  all  per- 
sons by  which  they  are  bound.  Story 
en  Partnership,  sees.  332-336;  Ar- 
nold v.  Brown,  24  Pick.  (Mass.)  89, 
94,  35  Am.  Dec.  296;  Marlett  v. 
Jackman,  3  Allen  (Mass.)  287, 
Ames'  Cas.  551,  Burd.  Cas.  547; 


Butler  v.  Mullen,  100  Mass.  453." 

In  Hudson  Eeal  Estate  Co.  v. 
Tower  (1894),  161  Mass.  10,  36  N. 
E.  680,  42  Am.  St.  Bep.  379,  it  is 
said:  "Death  is  a  public  fact,  of 
which  all  the  world  must  take  notice, 
*  *  *  but  insanity  is  not."  The 
last  statement,  however,  was  not 
made  concerning  an  adjudication  of 
insanity. 

Where  partnership  is  dissolved  by 
war,  no  notice  is  required:  Bank 
v.  Matthews,  supra;  Griswold  v. 
Waddington,  supra.  So  held  also  in 
case  of  dissolution  by  marriage  of 
a  female  partner:  Little  v.  Hazlett 
(1900),  197  Pa.  591,  47  Atl.  855. 
An  assignment  for  the  benefit  of 
creditors  is  not  an  act  of  which  all 
persons  are  charged  with  notice: 
Kuser  v.  Wright  (1894),  52  N.  J. 
Eq.  825,  31  Atl.  397. 


326 


NOTICE  OF  DISSOLUTION  [§§  389,  390 

notice,3  though  where  disconnected  with  an  adjudication  as  to 
property  this  seems  not  so  clear. 

The  doctrine,  it  is  said,  does  not  extend  so  far  as  to  require 
one  to  take  notice  of  the  decrees  of  courts  of  other  states.* 

The  Uniform  Partnership  Act,  as  to  death  and  bankruptcy  at 
least,  repudiates  this  rule  of  imputed  notice  in  case  of  death 
or  bankruptcy,  clearly  as  between  the  partners,5  and,  apparently, 
as  to  third  persons  also.6 

§389.  Required  on  dissolution  by  or  through  act  of 

parties. — But  in  the  case  of  a  dissolution  by  or  through  the  act 
of  the  partners,  no  such  publicity  is  necessarily  incident  and 
therefore  a  different  rule  prevails.  In  such  cases,  whether  the 
partnership  comes  to  an  end  by  lapse  of  time  or  by  mutual  con- 
sent, or  by  the  act  of  one  of  the  partners,  notice  must  usually 
be  given. 

§390.  To  whom  notice  required. — Notice  may  be  required 
for  two  purposes  and  to  two  classes  of  persons : 

1.  If  a  partner  intends  to  dissolve  the  partnership  in  pur- 
suance of  his  power  to  do  so,  he  must,  as  has  been  seen  in  the 
preceding  subdivision,  usually  give  his  partners  notice  of  that 
fact,  both  as  a  means  to  the  dissolution,  and  also  for  the  pur- 
pose of  withdrawing  the  powrers  conferred  upon  them  at  the 
time  the  partnership  was  created. 

2.  But  the   question  most   frequently   arising,   and   the   one 
giving  most  difficulty,  is  the  question  of  notice  to  third  per- 
sons.   Of  these  there  are  two  classes :  those  who  have  had  previous 

3  Thus   there    is    frequently   cited  (3888),  96  Mo.  149,  9  Am.  St.  R. 
the    statement    of    Adams'    Equity,  328,  8  S.  W.  907.     See  also  Shelton 
157:  'Tor  it  is  presumed  that  legal  v.  Johnson  (1857),  4  Sneed  (Tenn.) 
proceedings,    during    their    continu-  672,  70  Am.  Dee.  265   (a  case  con- 
ance,  are  publicly  known  throughout  cerning  property). 

the    realm. ' '      See    Mining    Co.    v.          5  Sec.  34.     The  commissioners,  in 

Anglo-Calif.  Bank  (1881),  104  U.  S.  their  note  to  this  section,  avow  the 

192,  26  L.  ed.  707.  purpose  to  make  this  change  as  be- 

4  The  realm  referred  to  in  the  rule  tween  the  partners  themselves, 
quoted,    in    proceedings    concerning          6  Sec.   35  makes  no   exception  of 
property,  means  the  state  where  the  dissolution  by  such  events, 
property  is.    Carr  v.  Lewis  Coal  Co. 

327 


§391] 


LAW  OP  PARTNERSHIP 


dealings  with  the  firm  and  relied  upon  its  credit,  and  those  who 
have  not.  The  former  have  necessarily  knowlege  of  the  ex- 
istence of  the  firm,  and  have  had  occasion  to  rely  upon  the  credit 
of  its  members,  while  the  latter  have  not  necessarily  known  of 
it,  and  have  been  brought  into  no  personal  relation  with  it. 
Notice  to  both  classes  may  perhaps  be  necessary — to  the  former 
because  they  have  already  known  and  trusted  to  the  partner- 
ship and  are  therefore  likely  to  continue  to  do  so;  to  the  latter 
because  if  they  do  not  already  know  of  its  existence  or  have 
not  dealt  with  it,  they  may  hereafter  deal  in  reliance  upon  it 
and  be  deceived  by  supposing  it  to  continue ;  but  the  same  kind 
of  notice  is  not  required  for  both  classes.  Thus — 

§  391.  How  notice  given — 1.  To  those  who  have  given  credit 
to  the  firm. — Persons  of  the  first  class,  having  had  actual  notice 
of  the  existence  of  the  partnership,  and  having  given  credit  to 
it, — frequently  spoken  of  as  ' '  former  dealers, ' ' — should  be  given 
actual  notice  of  its  dissolution.8  It  is  not  very  material  how  the 

8  Uniform    Partnership    Act,    sec.      28  Conn.  1,  Gilm.  Gas.  341;  Thayer 


35  (16  I),  uses  the  language:  "Had 
extended  credit  to  the  partnership 
prior  to  the  dissolution  and  had  no 
knowledge  or  notice  of  the  dissolu- 
tion."  This  would  exclude,  e.  g., 
the  case  in  which  the  first  dealings 
were  after  dissolution,  and  then,  be- 
fore notice,  the  dealing  in  question. 

A  "former  dealer"  within  the 
meaning  of  the  rule  requiring  actual 
notice  is  one  who  has  extended  credit 
to  the  firm:  2  Bates  on  Partnership, 
§  613.  The  term  does  not  include 
one  who  has  previously  merely  pur- 
chased goods  from  the  firm:  Askew 
v.  Silman  (1895),  95  Ga.  678,  22  S. 
E.  573,  Mechem's  Gas.  474,  Burd. 
Gas.  106  (though  the  Georgia  Code 
requires  that  notice  shall  be  given 
"to  creditors"). 

A  single  former  transaction  may 
be  enough.  Block  v.  Price  (1887),  32 
Fed.  562;  Lyon  v.  Johnson  (1859), 


v.  Goss  (1895),  91  Wis.  90,  64  N. 
W.  312,  Mechem's  Gas.  492;  but 
compare  Merritt  v.  Williams  (1876), 
17  Kan.  287,  where  a  habit  of  deal- 
ing is  said  to  be  necessary. 

The  question  does  not  turn  upon 
the  amount  of  the  dealing:  Clapp 
v.  Rogers  (1855),  12  N.  Y.  283.  A 
single  sale  of  goods  to  the  firm  for 
cash  is  not  enough:  Clapp  v.  Rogers, 
supra;  Merritt  v.  Williams,  supra. 

Ordinarily  the  dealing  must  be 
with  the  firm  directly,  and  it  is  not 
enough,  for  example,  that  the  plain- 
tiff has  taken,  from  others,  paper 
upon  which  the  firm  was  a  maker  or 
endorser:  Hutchins  v.  Bank  of  Ten- 
nessee (1847),  8  Humph.  (Tenn.) 
418 ;  per  Verplanck,  Senator,  in  Ver- 
non  v.  Manhattan  Co.  (1839),  22 
Wend.  (N.  Y.)  183;  Rocky  Mt.  Nat. 
Bank  v.  McCaskill  (1891),  16  Colo. 
408,  26  Pac.  821.  Cases  may  easily 


328 


NOTICE  OF  DISSOLUTION  [§  392 

notice  is  given  or  by  whom;  the  important  thing  is  that  they 
receive  it. 

In  one  case,9  after  referring  to  the  method  of  giving  notice 
to  strangers,  the  court  said:  "The  rule  is  different  in  respect 
to  persons  who  have  dealt  with  the  firm  before  the  dissolution. 
The  rule  in  such  cases  in  this  state  requires  that,  to  relieve  a  re- 
tiring partner  from  subsequent  transactions  in  the  partnership 
name,  notice  of  the  dissolution  must  be  brought  home  to  the 
persons  giving  credit  to  the  partnership.  If,  in  any  way,  by 
actual  notice  served,  or  by  seeing  the  publication  of  the  dis- 
solution, or  by  information  derived  from  third  persons,  the  party, 
at  the  time  of  the  dealing,  is  made  aware  of  the  fact  that  the 
partnership  has  been  dissolved,  the  contract  will  not  bind  the 
firm.  It  is  sufficient  to  exempt  the  firm  from  liability  that  the 
person  so  contracting  with  a  partner  in  the  firm  name  knew  or 
had  reason  to  believe  that  the  partnership  had  been  dissolved, 
but  this  must  appear  and  be  found  by  the  jury,  or  else  the  con- 
tract will  be  treated  as  the  contract  of  the  partnership." 

§  392.  A  common  method  of  giving  the  notice  is  by  per- 
sonal communication  or  by  letter  or  circular  addressed  to  and 
received  by  all  persons  who  have  given  credit  to  the  firm.  Mail- 
ing the  notice,  properly  addressed,  raises  a  presumption  of 
its  due  receipt,  but  the  presumption  is  not  conclusive  and,  if 
rebutted,  actual  receipt  must  be  shown.10  Mere  publication  in 
a  newspaper  is  obviously  not  enough;  it  must  appear  further 
that  the  party  to  be  notified  saw  it  or  otherwise  knew  of  it.11 

be  imagined,  however,  in  which  the  ference  that  the  firm  still  continues, 

contrary  would  doubtless  be  held,  as,  9  Austin    v.    Holland    (1877),    69 

for  example,  where  the  intermediate  N.  Y.   571,  25  Am.  Eep.  246,  Me- 

party    was    merely    an    agency    for  chem's  Gas.  464,  Gilm.  Cas.  343.    In 

reaching  the  real  creditor.   See  Grin-  this  case  it  was  held  that  the  mere 

nan     v.     Baton     Eouge     Mills     Co.  mailing  of   a   notice    of  dissolution 

(1852),  7  La.  Ann.  638,  Mechem's  was   not   sufficient;    it  must   be.   re- 

Cas.  968.  ceived. 

Within  what  time  the  previous  10  Meyer  v.  Krohn  (1885),  114 
dealing  must  have  been  had  seema  111.  574,  2  N.  E.  495;  Young  v. 
not  to  be  settled,  but  certainly  no-  Clapp  (1892),  147  111.  176,  32  N.  E. 
tice  must  be  given  to  those  who  have  187,  35  N.  E.  372. 
extended  credit  within  a  time  so  re-  11  Notice  of  dissolution  was  pub- 
cent  as  to  reasonably  justify  the  in-  lished  in  a  paper  and  a  copy  of  the 

329 


§393] 


LAW  OP  PARTNERSHIP 


Notice  to  or  by  an  agent  will  suffice  if  the  receipt  or  the  giving 
of  it  respectively  was  within  the  scope  of  his  authority.12  The 
lack  of  notice  to  the  agent  who  has  the  knowledge  of  the  part- 
nership and  who  has  had  the  previous  dealings,  may  at  times 
avail  the  principal.13 

The  Uniform  Partnership  Act14  defines  " knowledge"  as  either 
actual  knowledge  of  the  fact  or  knowlege  of  such  other  facts 
as  would  indicate  bad  faith  if  he  proceeded;  while  " notice"  is 
either  a  direct  statement  to  the  person  or  a  written  statement 
delivered  through  the  mail  or  by  other  means  of  communication. 

§393.  How  notice  given— 2.  To  those  who  have  not  given 
credit  to  the  firm. — Of  the  persons  who  have  not  given  credit 
to  the  firm,  there  are  likewise  two  classes — those  who  knew 
of  the  partnership  but  had  not  dealt  with  it,  and  those  who 
did  not  know  of  it,  prior  to  its  dissolution.  As  to  the  latter 
class,  it  is  said  that  no  notice  at  all  is  necessary,16  upon  the 


paper  with  a  red  line  drawn  about 
the  notice  was  mailed  to  a  former 
dealer  residing  in  another  town. 
Held  not  alone  sufficient:  Haynes 
v.  Carter  (1873),  12  Heisk.  (Tenn.) 
7,  27  Am.  Eep.  747,  Meehem's  Cas. 
966.  Proof  of  the  publication  of 
the  notice  in  a  newspaper  is  not 
sufficient  where  it  is  not  shown  that 
the  other  party  either  took  or  read 
the  paper:  Eose  v.  Coffield  (1879), 
53  Md.  18,  36  Am.  Eep.  389,  Me- 
chem's Cas.  469,  Gilm.  Cas.  346. 
Even  though  he  was  a  subscriber  for 
the  paper,  it  is  not  enough  if  he 
shows  that  he  did  not  see  the  notice : 
Askew  v.  Silman  (1895),  95  Ga. 
678,  22  S.  E.  Eep.  573,  Mechem's 
Cas.  474.  But  it  has  been  held  to 
be  a  fact  from  which  the  jury  might, 
otherwise  at  least,  infer  actual  no- 
tice; Treadwell  v.  Wells  (1854),  4 
Cal.  260.  Mere  publication  is  not 
enough:  Eobinson  v.  Floyd  (1893), 


159  Pa.  165,  28  Atl.  258.  See,  also, 
Nicholson  v.  Moog  (1880),  68  Ala. 
471;  Stoddard  Mfg.  Co.  v.  Krause 
(1889),  27  Neb.  83,  42  N.  W.  913; 
Long  v.  Garnett  (1883),  59  Tex. 
229;  Gilchrist  v.  Brande  (1883),  58 
Wis.  184,  15  N.  W.  817;  Backus  v. 
Taylor  (1882),  84  Ind.  503;  Sibley 
v.  Parsons  (1892),  93  Mich.  538,  53 
N.  W.  786. 

12  See  Marsh  v.  Wheeler    (1904), 
77  Conn.  449,  59  Atl.  410,  107  Am. 
St.  E.  40;  Neal  v.  Smith  (1902),  54 
C.  C.  A.  226,  116  Fed.  20. 

13  See  Haines  v.  Starkey   (1901), 
82  Minn.  230,  84  N.  W.  910,  Me< 
ehem's  Cas.  974. 

14  Sec.  3. 

15  See  Austin  v.  Appling   (1891), 
88  Ga.  54,  13  S.  E.  955;  Benjamin 
v.    Covert    (1879),   47    Wis.    375,    2 
N.    W.    625;    First   Inter.   Bank   v. 
Brown   (1915),  130  Minn.  210,  153 
N.    W.    522;    Chamberlain    v.    Dow 


330 


NOTICE  OF  DISSOLUTION 


[§393 


ground  that,  as  they  did  not  learn  of  the  existence  of  the  part- 
nership until  it  had  actually  been  dissolved,  they  could  not  have 
been  misled  by  prior  appearances  or  influenced  by  former  habits 
of  reliance ;  and  therefore  they  could  have  no  reason  for  holding 
it  liable ;  and  this  is  doubtless  correct  where  no  element  of  estop- 
pel is  involved,16  though  notice  by  publication,  even  in  such 
cases,  would  be  the  safer  course.  As  to  the  former,  " general" 
notice  is  enough,  and  this  notice  may  be  given  in  a  variety  of 
ways,  though  publication  for  a  reasonable  period  in  a  newspaper 
of  general  circulation  at  the  place  where  the  partnership  busi- 
ness is  carried  on  is  deemed  the  most  effectual  and  appropriate.17 
The  English  Partnership  Act  provides  for  publication  in  the 
"Gazette,"  but  there  is  no  corresponding  official  publication  in 
this  country. 


(1862),  10  Mich.  319;  Swigert  v. 
Aspden  (1893),  52  Mirm.  565,  54 
N.  W.  738,  Mechem's  Cas.  971.  In 
the  last  case  it  is  said:  "It  is 
obvious  that  such  creditors  act 
wholly  upon  their  present  informa- 
tion of  the  firm  and  its  members, 
and  not  at  all  upon  their  past  knowl- 
edge. ' ' 

16  See  Benjamin  v.  Covert,  supra. 
Here  it  appeared  that  a  business  had 
been  carried  on  in  the  name  of  A. 
C.  His  brother,  G.  C.,  had  in  fact 
been  a  partner,  and  was  generally 
believed  and  reputed  in  the  neigh- 
borhood to  be  a  partner,  but  he  had 
•withdrawn  from  the  business,  giving 
no  notice,  and  A.  C.  was  conducting 
the  business  alone.  A.  C.  applied  to 
plaintiff  for  credit.  Plaintiff  had 
had  no  previous  dealings  with  him 
and  had  never  heard  of  any  partner- 
ship. A.  C.  told  plaintiff  that  G.  C. 
was  his  partner  and  was  financially 
responsible.  Plaintiff  took  time  to 
look  the  matter  up  and  upon  in- 
quiry learned  that  G.  C.  was  gener- 


ally reputed  to  be  a  partner.  He 
thereupon  gave  credit  to  what  he  be- 
lieved to  be  a  partnership  of  A.  C. 
and  G.  C.  doing  business  in  the 
name  of  A.  C.  Held,  that  evidence 
of  these  facts  was  competent,  and 
that  G.  C.  might  be  liable  upon  the 
ground  that  by  giving  no  notice  of 
his  retirement  he  was  acquiescing  in 
the  continuance  of  the  reputation  of 
his  being  a  partner,  which  reputa- 
tion he  knew  of. 

Where  a  contemplated  partnership 
was  abandoned  before  any  business 
had  been  done  under  it,  it  was  held 
that  no  notice  was  necessary  to  one 
who  had  had  no  knowledge  of  it  but 
who  had  later  dealt  with  the  other 
proposed  partner.  Chamberlain  v. 
Dow,  supra. 

17  In  New  York  this  was  said  to 
be  "the  only  safe  rule":  Citizens 
Nat.  Bank  v.  Weston  (1900),  162 
N.  Y.  113,  56  N.  E.  494.  See,  also, 
Bank  v.  Weston  (1899),  159  N.  Y. 
201,  54  N.  E.  40,  45  L.  E.  A.  547. 


331 


394] 


LAW  OF  PARTNERSHIP 


§  394.  Where  there  is  no  newspaper  available — as  in  the 

case  of  partnerships  located  in  small  or  remote  places — some 
other  method  of  giving  general  notice  must  be  adopted ;  but  even 
where  there  is  a  newspaper,  it  is  not  generally  held  to  be  im- 
perative that  it  should  be  used.  Other  methods  may  suffice  if 
they  are  reasonably  adapted  to  the  purpose,  which  is,  to  apprise 
generally  that  "public"  which  had  notice  of  the  partnership 
that  it  no  longer  exists.18  Even  though  no  method  of  giving 


18  Thus,  in  Lovejoy  v.  Spafford 
(1876),  93  U.  S.  430,  440,  Mechem's 
Cas.  977,  23  L.  ed.  851,  it  is  said: 
"We  think  it  is  not  an  absolute, 
inflexible  rule  that  there  must  be 
a  publication  in  a  newspaper  to 
protect  a  retiring  partner.  That  is 
one  of  the  circumstances  con- 
tributing to  or  forming  the  general 
notice  required.  It  is  an  important 
one,  but  it  is  not  the  only  or  an  in- 
dispensable one.  Any  means  that, 
in  the  language  of  Mr.  Bell,  are 
fair  means  to  publish  as  widely  as 
possible  the  fact  of  dissolution,  or 
which,  in  the  words  of  Judge  Ed- 
monds, are  public  and  notorious  to 
put  the  public  on  its  guard;  or,  in 
the  words  of  Judge  Nelson,  notice 
in  any  other  public  and  notorious 
manner;  or,  in  the  language  of  Mr. 
Verplanck,  notice  by  advertisement 
or  otherwise,  or  by  withdrawing 
the  exterior  indications  of  partner- 
ship, and  giving  the  public  notice 
in  the  manner  usual  in  the  com- 
munity where  he  resides,  are  means 
and  circumstances  proper  to  be  con- 
sidered on  the  question  of  notice. ' ' 
See,  also,  Ellison  v.  Sexton  (1890), 
105  N.  C.  356,  18  Am.  St.  Eep.  907, 
11  S.  E.  180;  Polk  v.  Oliver  (1879), 
56  Miss.  566;  Richards  v.  Butler 
(1880),  65  Ga.  593;  Central  Nat. 
Bank  v.  Frye  (1889),  148  Mass.  498, 
20  N.  E.  325. 


In  Ellison  v.  Sexton,  supra,  the 
court  said :  "  It  is  often  difficult  to 
determine  what  amounts  to  due  and 
sufficient  notice  of  the  retirement  of 
a  partner;  but  the  evidence  to  prove 
it  should  be  such  as  would  reason- 
ably warrant  the  jury  in  finding  the 
fact  of  notice;  that  the  party  to  be 
charged  with  it  actually  had  it,  or 
might,  by  reasonable  diligence,  have 
learned  of  the  dissolution  of  part- 
nership and  the  retirement  of  the 
partner  sought  to  be  charged,  from, 
the  means  and  opportunity  supplied 
or  afforded  for  the  purpose  of  giv- 
ing notice  of  the  same.  Generally, 
the  reasonableness  of  the  notice  will 
be  a  mixed  question  of  law  and  fact 
to  be  submitted  to  the  jury,  under 
proper  instructions  of  the  court,  as 
to  whether,  under  all  the  attending 
circumstances  of  the  particular  case, 
it  was  sufficient  to  warrant  the  in- 
ference of  actual  or  constructive 
knowledge  of  the  dissolution. ' ' 

There  is  no  fixed  rule  as  to  the 
number  of  papers  in  which  notice 
must  be  published,  or  as  to  the  char- 
acter of  the  paper,  or  the  number  of 
times  the  notice  must  appear,  or  as 
to  the  size  of  type  or  degree  of  con- 
spicuousness.  The  paper  must  be 
one  published  in  the  vicinity:  Rich- 
ards v.  Butler  (1880),  65  Ga.  593. 
Where  the  manufacturing  operations 
of  the  firm  were  carried  on  at  Baton 


332 


NOTICE  OF  DISSOLUTION 


[§394 


notice  was  consciously  adopted,  there  may  still  be  other  facts 
or  circumstances  which  sufficiently  show  that  the  partnership 
has  come  to  an  end. 


Bouge,  but  the  firm  maintained  an 
office  at  New  Orleans  where  its  chief 
financial  operations  were  conducted, 
a  notice  published  in  a  Baton  Eouge 
paper  only  was  held  not  enough: 
Grinnan  v.  Baton  Rouge  Mills  Co. 
(1852),  7  La.  Ann.  638,  Mechem's 
Cas.  968.  Where  the  firm  carried  on 
a  small  retail  business  in  northern 
Michigan,  it  was  held  not  necessary 
to  publish  notice  in  Chicago,  where 
goods  were  subsequently  bought  of  a 
wholesale  dealer  by  a  former  part- 
ner: Solomon  v.  Kirkwood  (1884), 
55  Mich.  256,  21  N.  W.  336,  Me- 
chem's Cas.  455,  Burd.  Cas.  554, 
Gilm.  Cas.  589. 

The  notice  must  appear  to  be  au- 
thoritative, but  it  is  held  that  it 
need  not  be  signed,  and  may  appear 
in  the  "local"  column:  Solomon  v. 
Kirkwood,  supra.  Compare  Citizens 
Nat.  Bank  v.  Weston,  supra,  which 
is  more  or  less  opposed. 

The  paper  must  be  one  of  general 
circulation,  and  the  notice  should  be 
published  a  reasonable  number  of 
times:  Ellison  v.  Sexton  (1890), 
105  N.  C.  356,  11  S.  E.  180,  18  Am. 
St.  Eep.  907  (one  insertion  in  a 
daily  paper  (held  insufficient). 

If  the  partner  relies  on  notice  left 
for  publication  in  a  weekly  paper, 
held,  that  he  runs  the  risk  of  deal- 
ings before  the  paper  can  appear: 
Martin  v.  Searles  (1859),  28  Conn. 
43,  Mechem's  Cas.  985. 

Other  means  of  notice  than  publi- 
cation may  be  resorted  to,  their  suffi- 
ciency being  usually  a  question  for 
the  jury.  See  Lovejoy  v.  Spafford 
(1876),  93  U.  S.  430,  23  L.  ed.  581, 


Mechem's  Cas.  977,  where  evidence 
of  various  facts  was  hold  admissible. 

A  change  in  name  may  be  suffi- 
cient, but  it  must  be  such  as  to  rea- 
sonably indicate  the  withdrawal  of 
the  defendant:  American  Linen 
Thread  Co.  v.  Wortendyke  (1862), 
24  N.  Y.  550;  Coggswell  v.  Davis 
(1886),  65  Wis.  191,  26  N.  W.  557; 
Gibbs  v.  Humphrey  (1895),  91  Wis. 
Ill,  64  N.  W.  Eep.  750.  Compare 
also  Bush  v.  McCarty  (1906),  127 
Ga.  308,  56  S.  E.  430,  9  Ann.  Cas. 
240;  Thayer  v.  Goss  (1895),  91  Wis. 
90,  64  N.  W.  312,  Mechem's  Cas. 
492. 

The  mere  fact  of  the  formation  of 
a  new  partnership  or  the  organiza- 
tion of  a  corporation  is  not  of  itself 
notice  of  the  dissolution  of  a  pre- 
cedent partnership.  There  must  be 
such  change  of  name  or  other  cir- 
cumstances as  to  reasonably  show 
that  it  was  that  particular  business 
which  was  reorganized.  See  God- 
dard  v.  Pratt  (1835),  33  Mass.  (16 
Pick.)  412;  Howe  v.  Thayer  (1835), 
34  Mass.  (17  Pick.)  91;  Weise  v. 
Gray's  Harbor  Com.  Corp.  (1904), 
111  111.  App.  647;  Seufert  v.  Gille 
(1910),  230  Mo.  453,  131  S.  W.  102, 
31  L.  E.  A.  (N.  S.)  471;  Southwick 
v.  Allen  (1839),  11  Vt.  75;  Arnold 
v.  Hart  (1898),  176  111.  442,  52  N. 
E.  936;  Overlock  v.  Hazzard  (1909), 
12  Ariz.  142,  100  Pac.  447;  Byrum 
v.  Clark  (1899),  125  N.  Car.  352,  34 
S.  E.  438. 

Change  in  business  conditions  may 
be  sufficient,  such  as  closing  the 
store,  ceasing  business,  moving 
away,  and  the  like,  though  the  suffi- 


333 


§  395]  LAW   OP  PARTNERSHIP 

The  Uniform  Partnership  Act  protects  one  who  had  known 
of  the  partnership  prior  to  its  dissolution  where  he  had  "no 
knowledge  or  notice " 19  of  the  dissolution,  and  ' '  the  fact  of 
dissolution  had  not  been  advertised  in  a  newspaper  of  general 
circulation  in  the  place  (or  in  each  place  if  more  than  one) 
at  which  the  partnership  business  was  regularly  carried  on."20 

§395.  Same  subject — Knowledge— Constructive  notice. — As 

is  pointed  out  in  the  preceding  section,  it  is  not  always  neces- 
sary that  any  notice  should  expressly  be  given.  The  party  con- 
cerned may  already  know  it  from  other  sources,  or  he  may  have 
knowledge  of  such  other  facts  so  related  to  the  case  that  formal 
notice  of  the  dissolution  may  be  deemed  unnecessary.  This  latter 
is  sometimes  termed  a  case  of  "constructive  notice."  The  drafts- 
men of  the  Uniform  Partnership  Act  criticise  this  last  expres- 
sion, and  suggest  a  sharp  distinction  between  knowledge  and 
notice.  Unfortunately  their  definition  of  "knowledge"  is  awk- 
ward, though  their  meaning  can  be  gleaned.  They  say  "A  per- 
son has  'knowledge'  of  a  fact  within  the  meaning  of  this  act 
not  only  when  he  has  actual  knowledge  thereof,  but  also  when 
he  has  knowledge  of  such  other  facts  as  in  the  circumstances 
shows  bad  faith. "  21  On  the  other  hand,  ' '  A  person  has  '  notice ' 
of  a  fact  within  the  meaning  of  this  act  when  the  person  who 
claims  the  benefit  of  the  notice  (a)  states  the  fact  to  such  person, 
or  (b)  delivers  through  the  mail,  or  by  other  means  of  com- 
munication, a  written  statement  of  the  fact  to  such  person  or 
to  a  proper  person  at  his  place  of  business  or  residence." 

As  stated  in  the  note  to  the  preceding  section  there  may  be 

ciency  of  these  facts  must  ordinarily  v.  Calhoun  (1904),  55  W.  Va.  246, 

be  left   to   the   jury:    Dickinson   v.  46  S.  E.  1024.    Notice  to  Dun's  and 

Dickinson    (1874),  25  Gratt.    (Va.)  Bradstreet's     commercial     agencies, 

321,  Mechem's  Gas.  477.     "Reputa-  plaintiff   not  being  a   subscriber  to 

tion  or  notoriety  in  the  community  either,  is  not  of  itself  enough.    Citi- 

is  not  itself  notice.     But  it  may  be  zens  Nat.   Bank  v.   Weston,   supra. 

considered    by    the    jury,    with    the  Bank  v.  Weston,  supra. 

other      evidence,      in      determining  19  These  terms  are  defined  by  the 

whether   an   inference   of  notice   to  Act. 

the    person    sought    to    be    charged  20See.  35  (1)    (b)    (II). 

with  it  should  be  drawn ' ' ;  Bush  v.  81  See.    3. 

McCarty,  supra.     See,  also,  Werner 

334 


NOTICE  OP  DISSOLUTION  [§§  396,  397 

many  situations  in  which  the  kind  of  ' '  knowledge ' '  here  referred 
to  may  be  present,  and  dispense  with  the  necessity  of  giving 
the  "notice"  otherwise  requisite. 


§  396.  Who  should  give  notice — Actual  and  ostensible  part- 
ners.— Notice  of  the  dissolution  may  be  given  by  either  part- 
ner, and  where  the  partnership  is  dissolved  by  mutual  consent 
all  of  the  partners  usually  unite  in  giving  it.  Each  partner 
who  withdraws  from  a  firm  is  interested  in  giving  notice,  for, 
as  will  be  seen,22  where  notice  is  required,  a  partner  who  retires, 
whether  by  sale  of  his  interest  or  any  other  similar  means,  will, 
until  notice  is  duly  given,  continue  liable  as  a  partner  for  future 
debts  to  those  otherwise  entitled  to  rely  upon  him  as  a  partner. 

If  the  partner  desiring  to  give  notice  is  prevented  by  his 
copartners  from  exercising  that  right,  they  may  -be  compelled 
to  do  what  may  be  necessary  to  enable  notice  to  be  given,  as 
to  sign  advertisements  or  join  in  notices  to  former  customers.23 

The  persons  most  obviously  interested  in  giving  notice  are,  of 
course,  the  actual  and  ostensible  partners;  but  a  merely  nominal 
partner  also,  if  he  wishes  to  withdraw  the  appearance  of  part- 
nership, will  be  interested  in  taking  such  steps  as  will  accom- 
plish that  purpose. 

§397.  Dormant  and  secret  partners. — A  dormant  part- 
ner, i.  e.,  one  both  secret  and  passive,24  is,  it  is  said,  not  bound 
to  give  notice  of  his  withdrawal,  for  no  one  of  the  public  knew 
of  his  connection  with  the  firm,  and  no  one,  therefore,  could 
have  relied  upon  it ; 25  but  a  mere  secret  partner  is  bound  to 

22  See  post,  §  398.  25  See  Elmira  Rolling  Mill  Co.  v. 

23 1  Lindley  on  Partnership  (Ew-  Harris,  supra;  Elkinton  v.  Booth 

ell's  ed.),  214;  Trough  ton  v.  Hun-  (1887),  143  Mass.  479,  10  N.  E. 

ter  (1854),  18  Beav.  470;  Hendry  460;  Austin  v.  Appling  (1891),  88 

v.  Turner  (1886),  32  Ch.  Div.  355.  Ga.  54,  13  S.  E.  955;  Nussbaumer 

24 For  definitions  of  who  is  a  dor-  v.  Becker  (1877),  87  111.  281,  29 

mant  partner,  see  Elmira  Rolling-  Am.  Rep.  53;  Lieb  v.  Craddock 

Mill  Co.  v.  Harris  (1891),  124  N.  (1888),  87  Ky.  525,  9  S.  W.  838; 

Y.  280,  26  N.  E.  541,  Mechem's  Pitkin  v.  Benfer  (1892),  50  Kan. 

Cas.  987,  Burd.  Cas.  398,  Gilm.  Cas.  108,  31  Pac.  695,  34  Am.  St.  R.  110, 

349;  Rowland  v.  Estes  (1899),  190  Mechem's  Cas.  383;  Brown  v.  Fos- 

Pa.  Ill,  42  Atl.  528.  ter  (1894),  41  S.  C.  118,  19  S.  E. 

335 


397] 


LAW   OF   PARTNERSHIP 


give  notice  of  his  withdrawal  to  those  who  knew  of  his  con- 
nection with  the  firm,  though  not  to  those  who  had  no  knowledge 
of  it.86  A  retiring  dormant  partner  would  also  he  liable  to  one 


299 ;  Milmo  Nat.  Bank  v.  Bergstrom 
(1892),  1  Tex.  Civ.  App.  151,  20  S. 
W.  836,  Mechem's  Gas.  481. 

Burden  of  proof  that  a  partner 
was  a  dormant  one  is  on  him  who 
seeks  to  escape  on  that  ground. 
Eowland  v.  Estes  (1899),  190  Pa. 
Ill,  42  Atl.  528. 

The  mere  fact  that  it  is  agreed 
among  the  partners  that  the  rela- 
tionship of  one  of  them  shall  not 
be  mentioned,  does  not  make  him 
a  dormant  partner;  Elmira  Boiling 
Mill  Co.  v.  Harris,  supra. 

The  mere  fact  that  a  creditor  does 
not  know  who  the  partners  are,  does 
not  make  them,  as  to  him,  dormant 
partners.  He  may  well  have  relied 
upon  their  credit,  although  he  had 
never  ascertained  their  names;  El- 
kinton  v.  Booth,  supra;  Deford  v. 
Reynolds  (1860),  36  Pa.  325. 

The  mere  fact  that  a  partner's 
name  does  not  appear  in  the  firm 
name  does  not  make  him  a  dormant 
partner.  When  a  partnership  is 
formed  and  an  artificial  name  is 
adopted,  e.  g.,  "Titusville  Savings 
Bank,"  it  must,  it  is  said,  ''be  re- 
garded as  an  invitation  to  give 
credit  not  to  the  empty  name  but 
to  the  individuals  who  compose  the 
association  thus  designated,  and 
hence  none  of  the  partners  can 
properly  claim  to  be  dormant  part- 
ners." Clark  v.  Fletcher  (1880), 
96  Pa.  416;  Shamburg  v.  Ruggles 
(1876),  83  Pa.  148;  Elkinton  v. 
Booth,  supra.  But  see  Hornaday  v. 
Cowgill  (1913),  54  Ind.  App.  631, 
101  N.  E.  1030;  Carter  v.  Whalley 


(1830),    1    B.    &    Ad.    11,    contra. 

Where  A  and  B  as  partners  do 
business  under  the  name  of  A  & 
Co.,  B  is  not  thereby  a  dormant 
partner;  Edward  v.  McFall  (1850), 
5  La.  Ann.  167;  Deering  v.  Flan- 
ders. (1870),  49  N.  H.  225;  Podras- 
nik  v.  Martin  (1887),  25  111.  App. 
300 ;  Elmira  Boiling  Mill  Co.  v.  Har- 
ris, supra;  Deford  v.  Beynolds,  su- 
pra. But  see  Heath  v.  Sansom 
(1832),  4  B.  &  Ad.  172;  Warren 
v.  Ball  (1865),  37  111.  76;  Kennedy 
v.  Bohannon  (1850),  50  Ky.  (11 
B.  Mon.)  118;  Grosvenor  v.  Lloyd 
(1840),  42  Mass.  (1  Mete.)  19,  con- 
tra. Compare  Benjamin  v.  Covert 
(1879),  47  Wis.  375,  2  N.  W.  625. 

But  where  A  and  B  do  business 
under  the  name  of  A  alone,  B  may 
be  a  dormant  partner.  See  Pitkin 
v.  Benfer  (1892),  50  Kan.  108,  31 
Pac.  695,  34  Am.  St.  E.  110,  Me- 
chem's Gas.  383;  Milmo  Nat.  Bank 
v.  Bergstrom  (1892),  1  Tex.  Civ. 
App.  151,  20  S.  W.  836,  Mechem's 
Gas.  481;  Nussbaumer  v.  Becker 
(1877),  87  111.  281,  29  Am.  Eep. 
53;  Kelley  v.  Hurlbut  (1826),  5 
Cow.  (N.  Y.)  534;  Brown  v.  Foster 
(1896),  41  S.  Car.  118,  19  S.  E. 
299. 

So  where  A,  B  and  C  do  business 
in  the  name  of  A  and  B  alone,  C 
may  be  a  dormant  partner.  See  Gor- 
man v.  Davis  (1896),  118  N.  Car. 
370,  24  S.  E.  770. 

26  See  Lieb  v.  Craddock,  supra; 
Milmo  Nat.  Bank  v.  Bergstrom,  su- 
pra; Edwards  v.  McFall,  supra. 


336 


NOTICE  OF  DISSOLUTION  [§  398 

who  knew  of  his  existence,  and  who  was  not  given  notice  of  his 
withdrawal.27 

This  exemption  of  the  dormant  partner  from  the  necessity 
of  giving  notice,  however,  is  not  always  to  be  relied  upon.  The 
supposedly  dormant  partner  may  find  that  he  has  in  fact  been 
discovered  or  disclosed,  perhaps  by  his  own  partner  and  in 
violation  of  their  agreement;  and,  while  he  would  doubtless  in 
such  a  case  have  a  remedy  against  his  partner,  he  would  also 
be  liable  to  the  creditor.28  There  is,  moreover,  much  difference 
of  view  as  to  who  is  to  be  deemed  a  dormant  partner  within 
the  rule,  though  the  weight  of  authority  in  this  country  sup- 
ports the  rule  as  stated  in  the  first  paragraph  of  this  section. 
The  Uniform  Partnership  Act  seems  to  take  the  same  view, 
though  the  language  is  somewhat  obscure.29 

§398.  Effect  of  not  giving  notice. — Where  a  partnership  is 
dissolved  or  a  known  member  of  the  firm  retires,  under  circum- 
stances requiring  notice,  then,  until  the  dissolution  or  retirement 
has  been  duly  notified,  the  power  of  each  partner  to  continue 
to  bind  the  others  by  contracts  within  the  scope  of  the  business, 
made  with  third  persons  entitled  to  notice,  remains  unimpaired, 
although  as  between  the  partners  themselves  his  authority  may 
be  at  an  end.30 

27  See  cases  in  preceding  note.   In      shall  be  satisfied  out  of  partnership 
Benjamin  v.  Covert  (1879),  47  Wis.       assets  alone  when  such  partner  has 
375,  2  N.  W.  625,  it  was  held  that      been  prior  to  dissolution — 

where  one   who   would   normally  be  (a)    Unknown  as  a  partner  to  the 

regarded  as  a  dormant  partner  be-  persons  with  whom  the  contract  is 

comes   generally   known   as  a   part-  made,  and 

ner,  and,  after  his  withdrawal  with-  (6)    So  far  unknown  and  inactive 

out  notice,  the  reputation  so  formed  in  partnership  affairs  that  the  busi- 

that  he  is  a  partner  still  continues,  ness  reputation  of   the   partnership 

a    new    customer    who    gives    credit  could  not  be  said  to  have  been  in 

after    such    withdrawal    but    in    re-  any    degree    due   to    his    connection 

liance  upon  that  continuing  reputa-  with  it."     (Suppose,  e.  g.,  that  an 

tion  may   hold  the  retiring  partner  unknown  and  inactive  partner  keeps 

liable.  the  firm  in  good  standing  by  timely 

28  See  Milmo  Nat.  Bank  v.  Berg-  and  judicious  advances  or  loans,  is 
strom,   supra;   Elmira   Boiling   Mill  he  a  "  dormant "  partner  within  this 
Co.  v.  Harris,  supra.  clause?) 

29  Sec.  35.  (2)    "The  liability  of  30  See  Morrill   v.   Bissell    (1894), 
a    partner    under    paragraph    (16)  99  Mich.  409,  and  note;  Prentiss  v. 

Mech.  Part.— 22  337 


398] 


LAW  OF  PARTNERSHIP 


The  retiring  partner,  in  the  absence  of  notice,  remains  liable 
also,  it  has  been  said,  for  the  torts  committed  subsequently  by 
his  late  partners  or  their  agents  in  the  line  of  their  former  busi- 
ness ; 31  but  this  can  be  true  only  of  those  torts  which  result 
from  reliance  upon  the  apparent  continuance  of  the  partner- 
ship.32 

The  partner  who  has  given  proper  notice  may,  of  course,  nul- 
lify its  effect  as  to  particular  persons  by  words  or  conduct  rea- 
sonably inducing  in  them  the  belief  that,  notwithstanding  the 
notice,  he  still  continues  as  a  partner.33 


Sinclair  (1831),  5  Vt.  149,  26  Am. 
Dec.  288,  and  note;  Austin  v.  Hol- 
land (1877),  69  N.  Y.  571,  25  Am. 
Eep.  246,  Mechem's  Gas.  464,  Gilm. 
Gas.  343;  Benjamin  v.  Covert 
(1879),  47  Wis.  375,  2  N.  W.  625. 
31  See  1  Lindley  on  Partnership 
(Ewell's  ed.),  214,  citing  Stables  v. 
Eley  (1825),  1  Car.  &  P.  614— a 
case  wherein  the  plaintiff  was  in- 
jured by  the  negligent  driving  of 
a  cart  which  still  bore  the  old  firm 
name.  But  see  Pollock's  Digest  of 
Partnership  (6th  ed.),  54,  where 
this  error  was  pointed  out.  See  also 
Smith  v.  Bailey  (1891),  2  Q.  B. 
403;  Shapard  v.  Hynes  (1900),  45 
C.  C.  A.  271,  104  Fed. -Eep.  449,  52 
L.  E.  A.  675;  Austin  v.  Appling 
(1891),  88  Ga.  54,  13  S.  E.  955. 


The  mistake  is  corrected  in  later 
editions  of  Lindley  on  Partnership, 
e.  g.,  the  7th  at  p.  79. 

32  See      Jewison      v.      Dieudonne 
(1914),  127  Minn.   163,  149  N.  W. 
20.      Compare   Sherrod  v.    Langdon 
(1866),   21    Iowa   518;    Maxwell   v. 
Gibbs  (1871),  32  Iowa  32. 

33  See  ante  §  106 ;  In  re  Kreuger 
(1871),  2   Low.   66,  Mechem's   Gas. 
183,      (continuing     name     in     firm 
name);    Brown  v.  Leonard    (1816), 
2  Chitty  120,  Ames'  Gas.  141;  (de- 
fendant   told    plaintiff    he    had    re- 
tired but  that  his  name  was  to  con- 
tinue to  be  used  for  a  time). 

Compare  In  re  Fraser  (1892),  2 
Q.  B.  633,  Mechem's  Cas.  781,  Burd. 
Gas.  108. 


338 


CHAPTER  XVII. 


OF   THE   EFFECT   OF   DISSOLUTION   UPON   THE   EIGHTS   AND 
AUTHORITY    OF   PAETNEES. 


399.  In  general. 

1.  Dissolution  by  Death. 

400.  Effect  on  rights  and  liabili- 

ties of  the  firm. 

401.  Effect    on   authority   of   firm 

as  agent  of  third  persons. 
402, 403.  Eights,   powers    and    lia- 
bilities    of    the     surviving 
partner. 

404.  Where  there  are  several  sur- 

vivors. 

405.  Statutory    changes    in    some 

states. 

406.  Uniform  Partnership  Act 

407.  Continuing     business     under 

provisions  of  will. 

408.  Continuing    in    pursuance    of 

partnership  articles. 

409.  Continuing    in    pursuance    of 

personal  agreements. 

410.  Provisions  that  survivor  shall 

acquire     interest     of     de- 
ceased. 

411.  Liability    of    estate    of    de- 

ceased partner  for  existing 
debts. 

2.  Dissolution  by  Bankruptcy, 
Insolvency,  Assignment,  Etc. 

412.  In  general. 

413.  Bankruptcy,      insolvency      or 

assignment  of  entire  firm. 


^  414.  Bankruptcy  of  one  partner — 
Solvent  partner  may  ad- 
minister. 

415, 416.  Insolvency,      assignment, 
selling  out  of  one  partner. 

417.  Eights    of    assignee    of 

such  partner's  interest. 

418.  Other  causes. 

3.  Dissolution  by  Judicial  Decree. 

419.  Eeceivership  usually  results. 

4.  Dissolution  by  Other  Causes. 

420.  Eights  and  liabilities  of  part- 

ners   after    dissolution — In 
general. 

421.  Authority   of   firm,   as   agent 

for  third  persons,  after  dis- 
solution. 

422.  Eights  of  partners  after  dis- 

solution under  Uniform 
Partnership  Act — Effect  of 
wrongful  dissolution. 
423, 424.  Authority  of  partners 
after  dissolution — Author- 
ity continues  for  the  pur- 
pose of  closing  up  the 
business. 

425.  No   authority   to   create 

new  obligations. 

426.  Authority  of  settling  or  liqui- 

dating partner. 


§  399.  In  general. — The  partnership  being  dissolved  for  some 
sufficient  reason,  and  due  notice  having  been  given  when  nec- 

339 


§§400,401]  LAW  OF  PARTNERSHIP 

essary,  it  remains  to  be  considered  what  is  the  effect  of  the  dis- 
solution, particularly  as  respects  the  powers  and  duties  of  the 
partners.  For  reasons  which  will  be  obvious,  dissolution  by 
death,  which  completely  removes  one  of  the  partners,  presents 
an  aspect  entirely  different  from  that  presented  when  dissolu- 
tion results  from  any  other  cause,  leaving  all  partners  alive 
and  capable  or  desirous  of  acting.  The  effect  of  death,  there- 
fore, must  be  separately  considered. 

1.  Dissolution  by  Death. 

§  400.  Effebt  on  rights  and  liabilities  of  the  firm. — Existing 
and  vested  rights  of  the  partners  are,  of  course,  not  destroyed 
by  the  death,  though  the  legal  ownership  of  them  may  be  altered.1 
Existing  liabilities  are  not  discharged,  though  the  method  of 
enforcing  them  may  be  changed.2  The  firm  not  being  an  entity, 
continuing  contracts  of  a  personal  sort  are  not  necessarily  dis- 
charged by  the  death  of  a  partner  as  though  the  firm  were  dead,3 
but  as  the  continuance  of  the  partnership  may  be  an  express 
or  implied  condition,  its  termination  in  fact  by  death  may  oper- 
ate to  terminate  such  a  contract.  The  decisions  in  the  case  of 
contracts  of  employment  by  the  firm  are  not  in  harmony.4 

§  401.  Effect  on  authority  of  firm  as  agent  of  third  persons. 

— Where  the  firm,  i.  e.,  the  partners  jointly  and  collectively,  has 
been  appointed  agent  of  a  third  person,  the  dissolution  of  the 
partnership  by  the  death  of  one  of  the  partners  will  ordinarily 
terminate  that  agency.6 

ISee  post,  §402.  Tasker  v.  Shepherd  (1861),  6  Hurl. 

2  See  post,  §411.  &  N.  575;  Burnet  v.  Hope   (1885), 

3  See  Hughes  v.  Oross  (1896),  166  9   Ont.    Eep.    10;    Greggs  v.    Swift 
Mass.  61,  43  N.  E.  1031,  55  Am.  St.  (1889),  82  Ga.   392,  9  S.  E.  1062, 
E.  375,  32  L.  E.  A.  620,  Burd.  Gas.  14  Am.  St.  E.  176,  5  L.  E.  A.  405; 
296.  Greenburg  v.  Early  (1893),  30  Abb. 

4  That  the  contract  is  not  termi-  N.  Cas.    (N.  Y.)    300. 

nated,  see  Fereira  v.  Sayres  (1843),  5  See    Mechem    on    Agency    (2nd 

5  Watts  &   S.    (Pa.)    210,  40   Am.  ed.)      §673;     Larson     v.     Newman 

Dec.   496.     Not   where   the  firm   in  (1909),  19  N.  Dak.  153,  121  N.  W. 

fact    continues;     Hughes    v.    Gross,  202,  23  L.  E.  A.   (N.  S.)  849. 
supra.       That     it     is     terminated: 

340 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS       [  §  402 


§402.  Rights,  powers  and  liabilities  of  the  surviving  part- 
ner.— The  death  of  one  partner  ordinarily  operates,  as  has  been 
seen,  to  dissolve  the  partnership.  Such  dissolution  ordinarily 
operates  instantly  and  ipso  facto  to  terminate  the  authority  of 
the  survivors  to  continue  the  business  or  make  new  contracts,  in 
the  firm  name.6  It  also  devolves  upon  the  survivors  peculiar 
rights  and  duties.  Upon  dissolution  by  death  the  entire  legal 
title  to  all  the  partnership  personalty  passes  to  the  surviving 
partner  or  partners ; 7  and  although  the  title  to  real  estate  ordi- 
narily descends  to  the  heir  of  the  deceased  partner  who  held 
it,  the  survivors,  as  has  been  seen,  have  the  power  in  equity  to 
make  it  available  for  the  purpose  of  liquidating  the  demands 
against  the  partnership.8  They  alone,  to  the  exclusion  of  the 
representatives  of  the  deceased  partner,  have  the  right  to  the 
possession  of  the  partnership  assets,9  and  to  collect  or  receive 


6  See  Lang  v.  Waring  (1850),  17 
Ala.  145;   Big  Four  Implement  Co. 
v.   Keyser    (1916),  99  Kan.   8,  161 
Pac.    592,   L.   E.   A.    1917    C.    166; 
First  Nat.    Bank    v.    Cody    (1893), 
93  Ga.  127,  19  S.  E.  831    (though 
•where  it  is  a  renewal  note  the  as- 
sets may  still  be  liable  for  the  orig- 
inal debt) :      Central  Sav.  Bank  v. 
Mead   (1873),  52   Mo.  546;    Macon 
Exch.    Bank    v.    Tracy    (1883),    77 
Mo.   594;    Bank  of  Port   Gibson  v. 
Baugh  (1848),  9  Sm.  &  M.   (Miss.) 
290;  Durant  v.  Pierson   (1891),  124 
N.  Y.  444,  26  N.  E.   1095,  21  Am. 
St.  E.   686,   12  L.   E.  A.   146,  Me- 
chem's Gas.  525;  Castle  v.  Eeynolds 
(1840),  10  Watts   (Pa.)   51;  Bauer 
Grocer     Co.    v.     McKee     Shoe     Co. 
(1899),  87  111.  App.  434. 

Estate  of  deceased  partner  is  not 
directly  bound  for  debt  so  created; 
Bagel  v.  Miller  (1903),  2  K.  B.  212. 

7  In  Barry  v.   Briggs    (1871),  22 
Mich.  201,  the  rule  is  stated  that  a 
sole    surviving   partner   has   the   en- 
tire legal   title   to  all  the  partner- 


ship assets.  He  has  the  right,  act- 
ing honestly  and  with  reasonable 
discretion  and  diligence,  to  dispose 
of  them  as  he  pleases,  to  settle  all 
debts  against  the  concern,  to  make 
any  compromise  he  may  deem  neces- 
sary, and  to  turn  the  assets  into  an 
available  and  distributable  form. 
See  also  Andrews  v.  Brown  (1852), 
21  Ala.  437,  56  Am.  Dee.  252,  Gilm. 
Cas.  267. 

8  See  ante,  §  169 ;  Shanks  v.  Klein 
(1881),  104  U.  S.  18,  26  L.  ed.  635, 
Mechem's  Cas.  211,  Ames'  Cas.  597, 
Gilm.  Cas.  >269. 

9  As    to    personalty    see    Hawkins 
v.  Capron   (1892),  17  E,  L  679,  24 
Atl.   466,  Mechem's  Cas.  499;    An- 
drews   v.    Brown    (1852),    21    Ala. 
437,  56  Am.  Dec.  252;  Starr  v.  Case 
(1882),  59  Iowa  491,  13  N.  W.  645 
(the  library  of  a  firm  of  lawyers) ; 
Murray  v.  Mumford  (1826),  6  Cow. 
(N.     Y.)     441     (the    firm     account 
books);    Hewitt    v.    Hayes    (1910), 
204  Mass.  586,  90  N.  E.  985,  27  L. 
E.  A.   (N.  S.)   154. 


341 


§402] 


LAW  OF  PARTNERSHIP 


debts  due  the  firm.10  Causes  of  action,  being  joint,  at  law,  sur- 
vive to  or  against  them,  and  therefore  they  alone  are  the  ones 
to  sue  or  be  sued  in  respect  to  partnership  dealings.11  But  while 


As  to  realty,  while  the  legal  title 
does  not  go  to  the  survivor,  he  would 
have  the  right  of  a  tenant  in  posses- 
sion wherever  the  title  stood  in  the 
name  of  both  or  of  himself  only; 
an  undoubted  right  to  the  posses- 
sion of  whatever  was  necessary  to 
enable  him  to  close  up  the  business; 
and  a  right  to  make  available  for 
partnership  purposes  any  legal  titles 
held  in  trust  for  the  partnership. 
See  Dyer  v.  Clark  (1843),  5  Mete. 
(Mass.)  562,  39  Am.  Dec.  697, 
Ames'  Gas.  251;  French  v.  Vanatta 
(1907),  83  Ark.  306,  104  S.  W.  141; 
Sternberg  v.  Larkin  (1897),  58  Kan. 
201,  48  Pac.  861,  37  L.  E.  A.  195; 
Clark  v.  Fleischmann  (1908),  81 
Neb.  445,  116  N.  W.  290. 

10  See  Peters  v.  Davis  (1811),  7 
Mass.    257;     Oakman    v.    Ins.    Co. 
(1867),    98    Mass.    57;    Belton    v. 
Fisher  (1867),  44  III  32;  Willson  v. 
Nicholson  (1878),  61  Ind.  241;  Bas- 
sett  v.  Miller  (1878),  39  Mich.  133. 

11  Survivor  sues  in  his  own  name, 
usually  describing  himself  as  "sur- 
vivor   of    himself    and    (the    other 
partner)     deceased."      Bepresenta- 
tives  of  deceased  partner  not  proper 
parties  defendant  to  be  joined  with 
survivor  in  actions  at  law  on  part- 
nership obligations.    Childs  v.  Hyde 
(1859),  10  Iowa  294,  77  Am.  Dec. 
113;  Voorhis  v.  Child's  Exr.  (1858), 
17  N.  Y.  354,  Burd.  Cas.  490,  Gilm. 
Cas.    298.      So,   also,    of    equitable 
actions  whose  sole  object  is  to  en- 
force an  accounting  by  the  partner- 
ship.   Rusling  v.  Brodhead    (1896), 
55  N.  J.  Eq.  200,  35  Atl.  841,  Burd. 
Cas.  273. 


Eepresentatives  of  deceased  part- 
ner not  necessary  or  proper  parties 
plaintiff  in  actions  to  enforce  rights 
belonging  to  the  partnership:  the 
survivor  alone  is  the  person  to  sue. 
Sterns  v.  Houghton  (1866),  38  Vt. 
583,  Gilm.  Cas.  273.  In  equity: 
Haig  v.  Gray  (1850),  3  DeO.  &  S. 
741,  Burd.  Cas.  246.  So,  of  causes 
of  action  arising  after  the  death: 
Bassett  v.  Miller  (1878),  39  Mich. 
133,  Gilm.  Cas.  271  (action  for  price 
of  goods  sold  by  survivor) ;  Pfeffer 
v.  Steiner  (1873),  27  Mich.  537, 
Gilm.  Cas.  272  (trespass  to  firm 
property  in  possession  of  survivor). 
Survivor  in  suing  may  join  an  in- 
dividual claim  with  one  accruing  to 
him  as  survivor:  Adams  v.  Hackett 
(1853),  27  N.  H.  289,  59  Am.  Dee. 
376,  Gilm.  Cas.  274;  Hancock  v. 
Hay  wood  (1789),  3  T.  E.  433. 

In  action  by  survivor  on  partner- 
ship claim,  held,  that  defendant  may 
set  off  claim  against  survivor  per- 
sonally: Holbrook  v.  Lackey  (1847), 
13  Mete.  (Mass.)  132,  46  Am.  Dec. 
726,  Meehem's  Cas.  999;  contra, 
Wain  v.  Hewes  (1819),  5  Serg.  & 
E.  (Pa.)  468.  A  surviving  part- 
ner, in  a  suit  against  him  for  a 
separate  debt  of  his  own,  may  set 
off  a  debt  due  to  him  and  his  de- 
ceased partner  jointly:  Slipper  v. 
Stidstone  (1794),  5  T.  E.  493; 
Johnson  v.  Kaiser  (1878),  40  N. 
J.  L.  286;  or  in  an  action  against 
him  on  a  partnership  debt,  he  may 
set  off  a  debt  due  him  personally: 
Lewis  v.  Culbertson  (1824),  11 
Serg.  &  E.  (Pa.)  48,  14  Am.  Dec. 
607.  The  legal  title  to  a  judgment 


342 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS       [§  402 


they  may  have  the  legal  title,  they  are  commonly  said  to  hold 
it  in  a  species  of  trust.12  It  is  their  duty  to  collect  and  preserve 
the  assets,  to  apply  them  to  the  payment  of  the  debts,  to  close 
up  the  business  with  reasonable  promptness,13  and  to  account 
to  the  representatives  of  the  deceased  partner  for  his  share  of 
the  final  balance.14  In  their  dealings  with  partnership  assets, 
the  surviving  partners  are  charged  with  all  the  duties  of  fair 


recovered  by  the  survivor  as  such 
is  in  him  personally:  Nehrbross  v. 
Bliss  (1882),  88  N.  Y.  600,  2  Civ. 
Proc.  E.  39,  Burd.  Gas.  246.  But 
survivor  cannot  sue  where  he  and 
his  copartner  while  living  could  not 
have  maintained  an  action:  Patton 
v.  Carr  (1895),  117  N.  Car.  176, 
23  S.  E.  182,  Burd.  Gas.  248. 

12  The  trust  relationship  is  much 
more  strongly  stated  in-  the  Ameri- 
can eases  than  in  the  English  cases. 
See,  for  example,  the  remarks  of 
Lord  Westbury  in  Knox  v.  Gye 
(1872),  L.  E.  5  Eng.  Ir.  App.  656, 
and  compare  the  views  of  the  Lord 
Chancellor  in  the  same  case. 

For  purposes  of  suit,  the  survi- 
vor is  permitted  to  deal  with  the 
partnership  claims  very  much  as 
though  he  owned  them.  See  Hoi- 
brook  v.  Lackey  (1847),  13  Mete. 
(Mass.)  132,  46  Am.  Dee.  726,  Me- 
chem's  Cas.  999,  and  cases  cited. 

Massachusetts  cases  speak  of  him 
as  the  absolute  owner,  though  sub- 
ject to  a  liability  to  account  for 
the  proceeds  and  for  their  applica- 
tion to  partnership  debts,  etc. 
Hewitt  v.  Hayes,  supra. 

Nevertheless,  he  is  not  the  un- 
qualified owner.  For  example,  his 
interest  in  the  partnership  property 
which  can  be  reached  by  his  indi- 
vidual creditor  in  competition  with 
firm  creditors,  is  not  increased. 
Maddock  v.  Skinker  (1896),  93  Va. 


479,  25  S.  E.  535,  Burd.  Cas.  250. 
See  also  Eiehardson  v.  Eedd  (1896), 
118  N.  Car.  677,  24  S.  E.  420,  Burd. 
Cas.  260. 

13  See   Clay  v.   Field    (1888),   34 
Fed.  375;  115  U.  S.  260;  118  U.  S. 
97;    Gable   v.  Williams    (1882),   59 
Md.  46;    Eoach  v.  Brannon,  supra. 

He  has  large  discretion  as  to 
methods,  if  acting  in  good  faith. 
Is  not  obliged  to  apply  assets  pro 
rota  on  all  debts,  but  may  make 
preferences,  if  no  statute  forbids. 

As  to  the  duty  of  the  survivor  to 
preserve  the  good  will  for  the  bene- 
fit of  the  partners,  and  his  liability 
if  he  appropriates  it  to  himself,  see 
Hutchinson  v.  Nay  (1903),  183 
Mass.  355,  67  N.  E.  601,  Mechem's 
Cas.  838,  s.  c.,  187  Mass.  262,  72 
N.  E.  974,  105  Am.  St.  E.  390,  68 
L.  B.  A.  186,  Mechem's  Cas.  842; 
Costa  v.  Costa  (1915),  222  Mass. 
280,  110  N.  E.  309 ;  Eowell  v.  Eowell 
(1904),  122  Wis.  1,  99  N.  W.  473; 
Eammelsberg  v.  Mitchell  (1875),  29 
Ohio  St.  22;  Lobeck  v.  Lee,  etc. 
Hardware  Co.  (1893),  37  Neb.  158, 
55  N.  W.  650,  23  L.  E.  A.  795; 
Joseph  v.  Herzig  (1910),  198  N.  Y. 
456,  92  N.  E.  103;  Dyer  v.  Shove 
(1897),  20  E.  I.  259,  38  Atl.  498, 
Burd.  Cas.  605. 

14  See  Valentine  v.  Wysor  (1890), 
123   Ind.   47,   23   N.   E.   1076,   7   L. 
E.  A.  788,  Mechem's  Cas.  500,  Gilm. 
Cas.  275. 


343 


§403] 


LAW  OP  PARTNERSHIP 


dealing  and  regard  for  the  interests  of  the  firm  which  are  re- 
quired of  trustees.15 

§403.  While  engaged  in  closing  up  the  business,  the 

surviving  partners  may  exercise  such  powers  as  are  reasonably 
necessary  to  accomplish  that  purpose;  and  though  no  contract 
which  they  may  make  will  directly  bind  the  representatives  or 
estate  of  the  deceased  partner,  yet,  if  the  liability  was  properly 
incurred,  the  survivors  may  reimburse  themselves  out  of  the 
partnership  assets,  and,  in  case  of  a  deficiency,  have  a  claim 
for  contribution  from  the  estate  of  the  deceased  partner.16  Thus 

K  A  surviving  partner  so  far  oc-      misappropriates    the    assets,    equity 


cupies  the  position  of  trustee,  that 
he  cannot  be  permitted  to  make 
gain  for  himself  at  the  expense  of 
the  estate  of  a  deceased  partner. 
Little  v.  Caldwell  (1894),  101  CaL 
553,  36  Pac.  107,  40  Am.  St.  E.  89; 
Galbraith  v.  Tracy  (1894),  153  111. 
54,  38  N.  E.  937,  46  Am.  St.  E. 
867,  28  L.  E.  A.  129,  Burd.  Gas. 
257;  Eussell  v.  McCall  (1894),  141 
N.  Y.  437,  36  N.  E.  498,  38  Am. 
St.  E.  807,  Burd.  Cas.  256;  Dewey 
v.  Chapin  (1892),  156  Mass.  35, 
30  N.  E.  223,  Burd.  Cas.  255;  Joseph 
v.  Herzig,  supra.  He  cannot  buy 
of  or  sell  to  himself  without  the 
consent  of  the  representatives  of 
the  deceased  partner.  Denholm  v. 
McKay  (1889),  148  Mass.  434,  19 
N.  E.  551,  12  Am.  St.  E.  574.  But 
he  is  not  incompetent  to  buy  from 
the  representatives  of  the  estate  of 
the  deceased  partner.  Valentine  v. 
Wysor,  supra.  See,  also,  Clark  v. 
Fleischmann,  supra;  Sternburg  v. 
Larkin  (1897),  58  Kan.  201,  48 
Pac.  861,  37  L.  R.  A.  195.  Must 
give  full  information  if  he  deals 
with  the  representatives.  Welbourn 
v.  Kleinle  (1900),  92  Md.  114,  48 
Atl.  81;  Tennant  v.  Dunlap  (1899), 
97  Va.  234,  33  S.  E.  620.  If  he 


will  give  relief.  Eussell  v.  MeCall 
(1894),  141  N.  Y.  437,  36  N.  E. 
498,  38  Am.  St.  E.  807.  He  is 
bound  to  keep  accurate  accounts  and 
to  keep  the  representatives  of  the 
deceased  partner  informed  of  all 
that  properly  concerns  them.  Heath 
v.  Waters  (1879),  40  Mich.  457. 

16  The  contracts  made  by  the  sur- 
viving partner  bind  himself  only, 
if  any  one,  though  he  may  by  stip- 
ulation limit  liability  to  goods 
pledged.  If  he  properly  incurs  such 
a  liability,  he  may  pay  it  out  of 
the  assets,  or  pledge  assets  for  its 
payment,  (see  Durant  v.  Pierson  in 
next  note).  He  may  be  sued  per- 
sonally upon  such  liabilities.  In 
case  of  deficiency  in  the  partner- 
ship assets  to  reimburse  him,  he 
may  have  contribution  from  the  es- 
tate of  the  deceased  partner.  He 
can  ordinarily  not  make  such  claim 
until  he  has  completed  the  adminis- 
tration of  the  partnership  affairs. 
See  generally  Blakely  v.  Smock 
(1897),  96  Wis.  611,  71  N.  W.  1052; 
Logan  v.  Dixon  (1889),  73  Wis. 
533,  41  N.  W.  713;  Gleason  v.  White 
(1867),  34  Cal.  2§8;  Hanna  v. 
Wray  (1874),  77  Pa.  27.  For  the 
amount  of  his  claim  after  settle- 


314 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS        [§  403 

they  may  sell,  mortgage  or  pledge  the  property,  borrow  money,17 


ment  and  exhausting  of  partnership 
assets,  he  may  prove  as  an  indi- 
vidual creditor  against  estate  of  de- 
ceased partner,  pari  passu  with 
other  individual  creditors,  it  is  held 
in  Olleman  v.  Reagan  (1867),  28 
Ind.  109.  [Compare  In  re  Ruby 
(1897),  24  Ont.  App.  509].  Sub- 
ject to  their  priority,  says  Uniform 
Partnership  Act,  Sec.  40  (i). 

Undoubtedly,  it  might  have  been 
held  in  these  eases  that  the  surviv- 
ing partner  had  an  authority 
coupled  with  an  interest  which 
would  have  made  it  irrevocable  by 
the  partner's  death.  (See  Blodgett 
v.  American  Nat.  Bank  (1881),  49 
Conn.  9;  Laughlin  v.  Lorenz  (1864), 
48  Pa.  275,  86  Am.  Dec.  592).  But 
that  is  not  the  way  in  which  the 
matter  has  been  developed. 

Persons  dealing  with  the  surviv- 
ing partner  are,  of  course,  ordina- 
rily charged  with  notice  of  his  situ- 
ation and  restricted  authority. 

The  partnership  creditor  who  ob- 
tains judgment  against  the  survivor 
may  levy  upon  the  partnership 
property  and  the  property  of  the 
surviving  partner,  but  not  upon  the 
separate  property  of  the  deceased 
partner.  His  remedy  as  to  the  lat- 
ter is  in  equity,  as  will  be  seen  post, 
§  411.  As  to  levies  upon  the  part- 
nership property,  by  attachment  or 
execution,  see  Roach  v.  Brannon 
(1879),  57  Miss.  490;  Krueger  v. 
Speith  (1889),  8  Mont.  482,  20  Pac. 
664,  3  L.  R.  A.  291;  Stampfle  v. 
Bush  (1913),  71  W.  Va.  659,  77  S. 
E.  283. 

17  Thus  in  Durant  v.  Pierson 
(1891),  124  N.  Y.  444,  26  N.  E. 
1095,  21  Am.  St.  R.  686,  12  L.  R. 


A.  146,  Mechem  's  Gas.  525,  the  court 
say:  "When  a  partnership  is  dis- 
solved by  the  death  of  a  partner,  the 
survivor  is  entitled  to  the  possession 
and  control  of  the  joint  property  for 
the  purpose  of  closing  its  business, 
and  to  that  end  and  for  that  purpose 
he  may,  according  to  the  settled  prin- 
ciples of  the  law  of  partnership, 
administer  the  affairs  of  the  firm, 
and  by  sale,  mortgage,  or  other  rea- 
sonable disposition  of  the  property, 
make  provision  for  meeting  its  ob- 
ligations. He  may,  for  that  pur- 
pose, borrow  money,  and  give  a 
valid  pledge  of  the  copartnership 
property  for  its  repayment.  Wil- 
liams v.  Whedon,  109  N.  Y.  333, 
4  Am.  St.  R.  460;  Emerson  v.  Sen- 
ter,  118  U.  S.  3,  8;  Fitzpatrick  v. 
Flannagan,  106  U.  S.  648;  Butchart 
v.  Dresser,  4  DeGex,  M.  &  G.  542, 
10  Hare  453;  In  re  Clough,  Brad- 
ford Commercial  Banking  Co.  v. 
Cure,  L.  R.  31  Ch.  Div.  326."  See, 
also,  Barton  v.  Love  joy  (1894),  56 
Minn.  380,  57  N.  W.  935,  46  Am. 
St.  R.  482;  Peoples  Bank  v.  Wil- 
cox  (1904),  136  Mich.  567,  100 
N.  W.  24;  Kenney  v.  Howard 
(1896),  68  Vt.  194,  34  Atl.  700, 
Burd.  Gas.  271;  In  re  Bourne 
[1906],  2  Ch.  427,  3  Br.  Rul.  Gas. 
569  and  note. 

Survivor  may  assign  choses  in  ac- 
tions belonging  to  the  partnership, 
as  well  as  dispose  of  the  tangible 
property.  See  Lindner  v.  Adams 
County  Bank  (1896),  49  Neb.  735, 
68  N.  W.  1028,  Mechem 's  Gas.  523, 
Burd.  Gas.  262. 

Notice  of  dishonor  to  charge  the 
partnership  may  be  given  to  the 
survivor.  Slocomb  v.  DeLizardi 


345 


§403] 


LAW   OP   PARTNERSHIP 


and  repay  it  put  of  the  assets,  or  make  an  assignment  for  the 
benefit  of  creditors.18  They  ordinarily  may  and  should  com- 
plete the  executory  contracts  into  which  the  firm  had  entered,19 
and  for  this  purpose  have  the  authority,  in  the  manner  above 
stated,  to  purchase  materials,  employ  assistance  or  make  such 
other  incidental  contracts  as  the  case  reasonably  requires.20 


(1869),  21   La.  Ann.  355,  99  Am. 
Dec.  740. 

18  Although  there  has  been  a  lit- 
tle   doubt    about    the    right    of    the 
survivor  to  make  an  assignment  for 
the  benefit  of  creditors,  the  weight 
of    authority    undoubtedly    sustains 
it:        Fitzpatrick       v.       Flannagan 
(1882),    106  U.   S.   654,   27  L.   ed. 
211;     Emerson    v.    Senter     (1885), 
118  U.  S.  3,  30  L.  ed.  49,  Burd.  Gas. 
253;    Williams  v.    Whedon    (1888), 
109  N.  Y.  333,  16  N.  E.  365,  4  Am. 
St.    K.    460;     Patton    v.    Leftwich 
(1889),  86  Va.  421,   10  S.  E.  686, 
19  Am.  St.  E.  902,  6  L.  E.  A.  569; 
Breen  v.  Eichardson  (1883),  6  Colo. 
605,  Gilm.  Gas.  410;  in  the  absence 
of  a  statute  expressly  or  by  impli- 
cation     forbidding:       Shattuck      v. 
Chandler    (1889),  40  Kan.   516,  20 
Pac.  225,  10   Am.   St.   E.  227,  Me- 
chem's  Cas.  363;   State  v.  Withrow 
(1897),  141  Mo.  69,  41  S.  W.  980. 

See  also  Hewitt  v.  Hayes  (1910), 
204  Mass.  586,  90  N.  E.  985,  27  L. 
E.  A.  (N.  S.)  154. 

Cannot  give  preferences  in  Colo- 
rado; Salisbury  v.  Ellison  (1883),  7 
Colo.  167,  2  Pac.  906,  49  Am.  Eep. 
347. 

19  The  liability  of  all  the  partners, 
including  the  estate  of  the  deceased 
partner,  for  existing  obligations  is, 
of  course,  in  the  ordinary  case,  not 
terminated  by  the  death,  (see  Davis 
v.     Sowell     (1884),    77    Ala.    262; 
Mason    v.    Tiffany    (1867),    45    111. 


392;  McGill  v.  McGill  (1859),  59 
Ky.  (2  Mete.)  258;  Winter  v.  In- 
ness  (1838),  4  Myl.  &  C.  101;  De- 
vaynes  v.  Noble  (1831),  2  Euss.  & 
M.  495) ;  though,  as  will  be  seen 
(post,  §  411)  the  method  of  enforc- 
ing it  is  altered. 

Contracts,  however,  depending 
upon  the  continued  existence  of  a 
particular  person  would  usually  be 
terminated  by  his  death.  See 
Hughes  v.  Gross  (1896),  166  Mass. 
61,  32  L.  E.  A.  620,  43  N.  E.  1031; 
Burd.  Cas.  296,  55  Ani.  St.  E. 
375;  Tasker  v.  Shepherd  (1861), 
6  H.  &  N.  575;  Schlau  v.  Enzen- 
backer  (1914),  265  111.  626,  107 
N.  E.  107,  L.  E.  A.  1915  C  576; 
Clifton  v.  Clark  (1904),  83  Miss. 
446,  36  So.  251,  102  Am.  St.  E.  458, 
66  L.  E.  A.  821,  Mechem's  Cas.  1010. 

Contracts  between  two  firms  hav- 
ing some  members  in  common,  one 
of  whom  has  died  (thereby  dissolv- 
ing both  firms),  are  held  not  to  be 
within  this  rule  for  completing  per- 
formance. Oliver  v.  Forrester 
(1880),  96  111.  315,  Mechem's  Cas. 
1004. 

There  may  be  contracts,  e.  g., 
wholly  executory  contracts  for  work 
involving  long  time,  much  expense 
and  great  risk  wherein  it  would 
doubtless  be  rather  the  part  of  pru- 
dence to  endeavor  to  procure  a  can- 
cellation on  fair  terms. 

20  See  Little  v.  Caldwell  (1894), 
101  Gal.  553,  36  Pac.  107,  40  Am. 


346 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS        [§  404 

Upon  the  death  of  the  sole  surviving  partner  before  the  estate 
is  closed,  his  powers  and  liabilities  pass  to  his  administrator 
or  executor.21  The  right  of  the  survivor  to  compensation  has 
already  been  referred  to  in  a  previous  section.22 

The  fact  that  the  surviving  partner  was  a  dormant  one,  or 
even  that  he  is  insolvent,  is  held  not  to  affect  his  right  to  wind 
up  the  partnership  affairs,  as  above  stated;  but  under  the  Uni- 
form Partnership  Act  the  survivor  may  not  act  if  he  has  become 
bankrupt.28 

The  Uniform  Partnership  Act  provides  that  "on  the  death 
of  a  partner  his  right  in  specific  partnership  property  vests  in 
the  surviving  partner  or  partners,  except  where  the  deceased  was 
the  last  surviving  partner,  when  his  right  in  such  property  vests 
in  his  legal  representative.  Such  surviving  partner  or  part- 
ners, or  the  legal  representative  of  the  last  surviving  partner, 
has  no  right  to  possess  the  partnership  property  for  any  but  a 
partnership  purpose. ' '  24 

§  404.  Where  there  are  several  survivors. — Where  there  are 
two  or  more  survivors  their  respective  rights,  powers  and  duties 
in  the  field  of  closing  up  the  business  are,  as  were  their  rights, 
powers  and  duties  in  the  field  of  carrying  it  on  before  the  dis- 
solution, ordinarily  equal.25  Either  one,  for  example,  may  re- 
st. B.  89;  Calvert  v.  Miller  (1886),  fied  under  this  rule,  while  general 
94  N.  C.  600,  Mechem's  Gas.  1002;  purchases  to  enable  the  business  to 
Oliver  v.  Forrester  (1880),  96  111.  be  continued  would  not  be.  Oliver 
315,  Mechem's  Cas.  1004;  Andrews  v.  Forrester,  supra;  Andrews  v.  Stin- 
v.  Stinson  (1912),  254  111.  Ill,  98  son,  su.pra;  Big  Four  Implement  Co. 
N.  E.  222,  Ann.  Cas.  1913  B  928;  v.  Keyser  (1916),  99  Kan.  8,  161 
Eemick  v.  Emig  (1866),  42  111.  342;  Pac.  592,  L.  E.  A.  1917  C  166. 
Bust  v.  Chisholm  (1881),  57  Md.  21  Galbraith  v.  Tracy  (1894),  153 
376;  Condon  v.  Callahan  (1905),  111.  54,  38  N.  E.  937,  46  Am.  St. 
115  Tenn.  285,  89  S.  W.  400,  112  B.  867,  28  L.  B.  A.  129,  Burd.  Cas. 
Am.  St.  E.  833,  1  L.  B.  A.  (N.  S.)  257;  Dayton  v.  Bartlett  (1882),  38 
643,  5  Ann.  Cas.  659;  O'Connell  v.  Ohio  St.  357;  Brooks  v.  Brooks 
Schwanabeck  (1889),  76  Mich.  517,  (1873),  12  Heisk.  (Tenn.)  12. 
43  N.  W.  599;  Miller  v.  Hoffman  22  See  ante,  §178. 
(1887),  26  Mo.  App.  199.  Small  23  Sec.  35  (3)  (b) ;  Sec.  37. 
purchases,  incident  to  closing  up,  or  24  Sec.  25  (d). 

calculated  to  promote  the  sale  of  the  25  See  Davis  v.  Sowell  (1884),  77 
residue  of  the  assets,  may  be  justi-  Ala.  262. 

347 


§§405,406]  LAW   OF   PARTNERSHIP 

ceive  payment  of  a  debt  due  to  the  partnership,  or  make  payment 
of  a  debt  due  from  it.26  They  would  have  equal  rights  to  the 
possession,  and  equal  duties  as  to  the  disposition,  of  the  assets.27 
Neither  one  could  bind  the  other  personally  by  a  new  contract 
made  in  the  firm  name  or  otherwise,  without  the  latter 's  con- 
sent ; 28  but  if  it  were  an  expense  properly  incurred  in  closing 
up  the  business,  it  could  be  paid  out  of  the  assets,  and,  in  case 
of  a  deficiency,  the  other  survivor  would  be  liable  for  contribu- 
tion of  his  pro  rata  share,  as  would  also  the  estate  of  the  de- 
ceased partner. 

They  may,  as  between  themselves,  and  often  do,  arrange  that 
one  of  them  shall  act  instead  of  all  of  them  in  closing  up  the 
affairs,  but  this  would  not  of  itself  enlarge  the  authority  of 
that  one.29 

§405.  Statutory  changes  in  some  States. — In  a  number  of 
states,  for  example,  Kansas,  Maine,  Missouri,  New  Mexico  and 
Washington,  statutes  have  made  a  more  or  less  radical  change 
in  the  situation  of  the  surviving  partner.  These  statutes  com- 
monly provide  that  the  partnership  estate  shall  be  administered 
by  the  representative  of  the  deceased  partner  unless  the  sur- 
vivor, within  a  time  limited,  applies  for  administration  and 
gives  a  bond  provided  for  by  the  statutes.30 

§  406.  Uniform  Partnership  Act. — The  Uniform  Partnership 
Act  makes  no  specific  provision  respecting  administration  by 

26  See  Davis  v.  Sowell,  supra.  liable  to  a  third  person  for  a  con- 

27  See  Davis  v.  Sowell,  supra.  tract  made  by  his  direction  through 

28  See  Marlett  v.  Jackman  (1861),      the  one  serving  as  his  agent). 

85  Mass.  (3  Allen)  287,  Ames'  Gas.          80  See      Shattuck      v.      Chandler 

551,    Burd.    Gas.    547;    Jenness    v.  (1889),  40  Kan.  516,  20  Pac.  225, 

First  Nat.   Bank    (1879),  40  Mich.  10  Am.   St.  R.  227,  Mechem's  Gas. 

347;  Matteson  v.  Nathanson  (1878),  363;  Bass  v.  Emery  (1883),  74  Me. 

38  Mich.  377:   Bass  Dry  Goods  Co.  338;  Shaw,  et  al.  Appellants  (1889), 

v.    Granite    City    Mfg.    Co.    (1902),  81  Me.  207,  16  Atl.  662;  Easton  v. 

116  Ga.  176,  42'  S.  E.  415.  Courtright  (1884),  84  Mo.  27;  Dow 

29  See  Bass  Dry  Goods  Co.  v.  Gran-  v.  Simpson  (1912),  17  N.  Mex.  357, 
ite  City  Mfg.  Co.  supra.     (Here  one  132  Pac.  568;  State  v.  Neal  (1902), 
survivor   alone  acted   in   closing  up,  29  Wash.  391,  69  Pac.  1103.   A  some- 
and  the   other  served  as  his  agent.  what  similar  statute  exists  in  Illi- 
Held,  that  the  one  who  acted  was  nois;  also  one  in  Louisiana. 

348 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS        [§  407 

the  surviving  partner.  Section  37  provides  that  "unless  other- 
wise agreed,  the  partners  who  have  not  wrongfully  dissolved 
the  partnership  [and  this  would  include  the  surviving  partner 
or  partners]  or  the  legal  representative  of  the  last  surviving 
partner,  not  bankrupt,  has  the  right  to  wind  up  the  partnership 
affairs;  provided,  however,  that  any  partner,  his  legal  repre- 
sentative or  his  assignee,  upon  cause  shown,  may  obtain  winding 
up  by  the  court."  The  partnership  is  "dissolved"  though  not 
"terminated"  by  the  death  of  any  partner;  31  "except  so  far  as 
may  be  necessary  to  wind  up  partnership  affairs  or  to  complete 
transactions  begun  but  not  then  finished,  dissolution  terminates 
all  authority  of  any  partner  to  act  for  the  partnership"  in  the 
situations  enumerated;32  "after  dissolution  a  partner  can  bind 
the  partnership  (except  as  provided  in  paragraph  3),  (a)  by 
any  act  appropriate  for  winding  up  partnership  affairs  or  com- 
pleting transactions  unfinished  at  dissolution,  (b)  by  any  trans- 
action which  would  bind  the  partnership  if  dissolution  had  not 
taken  place"  provided  notice  had  not  been  given  when  and  as 
required.33  Nevertheless,  it  is  believed  that  in  binding  "the 
partnership,"  after  the  death  of  one  partner,  under  this  pro- 
vision the  estate  of  the  deceased  partner  or  his  legal  representa- 
tive is  not  included.  On  the  other  hand,  where  there  are  several 
survivors  it  would  seem  that  each  was  the  agent  for  all  and 
could  bind  them  personally  in  winding  up  the  partnership  affairs 
or  completing  transactions  unfinished  at  the  time  of  the  dis- 
solution. 

"The  dissolution  of  the  partnership  does  not  of  itself  dis- 
charge the  existing  liability  of  any  partner. "  3*  "  The  individ- 
ual property  of  a  deceased  partner  shall  be  liable  for  all  obliga- 
tions of  the  partnership  incurred  while  he  was  a  partner,  but 
subject  to  the  prior  payment  of  his  separate  debts."85 

§407.  Continuing  business  under  provisions  of  will. — The 

authority  of  the  surviving  partners  is  to  close  up  and  not  to 
continue  the  partnership  affairs,  and  they  have  therefore  no 

31  Sec.  30.  34  See.  36   (1). 

82  Sec.  33.  35  See.  36  (4). 

33  Sec.  35. 

349 


407] 


LAW  OF  PAETNEESHIP 


right  to  make  new  contracts,  engage  in  fresh  enterprises  or 
carry  on  the  partnership  business  for  any  longer  period  than  is 
reasonably  necessary  to  enable  the  affairs  to  be  closed  up  without 
unnecessary  loss  or  injury.  If,  in  violation  of  their  duty,  they 
do  continue  the  business,  they  may  be  restrained  by  injunction, 
or  they  may  be  held  accountable  for  interest  or  profits  and  will 
be  charged  personally  with  the  losses.36 

The  deceased  partner  may,  however,  by  his  will  authorize 
the  business  to  be  carried  on  for  a  period  limited  therein,  either 
by  the  survivors  alone  or  by  the  survivors  and  his  executors 
jointly,  and  the  business  may  be  continued  in  pursuance  of 
such  a  provision.37  In  such  a  case,  unless  there  is  something 


36  See      Story      on      Partnership, 
§  343;  Eobinson  T.  Simmons  (1888), 
146  Mass.  167,  15  N.  E.  558,  4  Am. 
St.  E.  299. 

37  Such  provisions  are  usually  per- 
missive   only,    and    not    obligatory. 
The   executor,    for   example,   is   not 
obliged  to  become  a  partner  and  as- 
sume   that    risk.      See    Andrews    v. 
Stinson   (1912),  254  111.  Ill,  98  N. 
E.  222,  Ann.  Cas.   1913  B  928.     If 
he  does  do  so,  he  is  usually  person- 
ally liable  for  the  debts  subsequently 
contracted,   with   a  right  to   indem- 
nity  out   of  the   partnership  assets. 
These   may    prove    insufficient:    See 
Laible    v.   Perry    (1880),   32   N.    J. 
Eq.  791;  Wild  v.  Davenport  (1886), 
48  N.  J.  L.  129,  7  Atl.  295,  57  Am. 
Kep.  552,  Burd.  Cas.  77;  Austin  v. 
Munro  (1872),  47  N.  Y.  360;  Clop- 
ton  v.  Gholson  (1876),  53  Miss.  466; 
Wade  v.  Pope  (1870),  44  Ala.  690; 
"The    Liabilities    of    a    Partner's 
Executor"     (1906),     54     American 
Law  Eegister  565. 

So,  also,  where  the  survivor  is  au- 
thorized to  continue :  He  is  not 
obliged  to  do  so  unless  he  has  agreed 
to  do  it.  If  he  does  continue,  he 
usually  makes  himself  personally 


liable  for  the  subsequent  debts,  with 
a  right  to  reimbursement  out  of  the 
partnership  assets.  See  cases  cited 
in  next  section.  Wherever  it  is 
optional  so  to  act  or  not  the  exe- 
cutor or  survivor  could  refuse  to  act 
unless  and  until  those  who  might  be 
interested  in  his  acting,  e.  g.,  the 
heirs  of  the  deceased  partner,  should 
make  special  terms  for  his  protec- 
tion. 

It  is  said  that  provisions  for  con- 
tinuance of  the  business  by  the  exe- 
cutor must  specifically  authorize  it 
in  order  to  justify  it.  Exchange 
Bank  v.  Tracy  (1883),  77  Mo.  594. 
See,  also,  Ex  parte  Manchester  Bank 
(1879),  12  Ch.  D.  917,  Burd.  Cas. 
263;  Altgelt  v.  Sullivan  (1903),  — 
Tex.  Civ.  App.  — ,  79  S.  W.  333. 

If  the  executor  does  not  become  a 
partner,  he  will  not,  merely  by  tacit- 
ly permitting  the  firm  assets  to  re- 
main with  the  survivor  as  directed, 
or  by  receiving  part  of  the  profits  of 
the  business,  become  liable  for  the 
debts  of  the  continued  business.  See 
Wild  v.  Davenport,  supra;  Walker 
v.  Walker  (1889),  88  Ky.  615,  11  S. 
W.  718;  Owens  v.  Mackall  (1870), 
33  Md.  382;  Tisch  v.  Eockafellow 


350 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS       [§  408 


in  the  will  to  indicate  a  contrary  purpose,  it  will  be  presumed 
that  the  deceased  intended  to  subject  to  the  hazard  of  the  busi- 
ness only  the  capital  already  embarked  in  it,  and  not  the  gen- 
eral residue  of  his  estate ; 38  but  under  clear  and  appropriate 
provisions  the  entire  estate  may  be  involved.39 

§408.  Continuing  in  pursuance  of  partnership  articles. — 
Provisions  for  continuing  the  business  by  the  survivor  are  fre- 
quently found  in  the  partnership  articles.  They  may  be  permis- 
sive only  or  contractually  obligatory.  They  may  also  define  the 
term  and  conditions.  If  they  do  not,  permissive  provisions,  at 
least,  are  usually  held  to  apply  only  to  the  assets  of  the  deceased 
already  embarked  in  the  business  and  not  to  the  general  residue 
of  his  estate.40  Contractually  obligatory  provisions  are,  of  course, 


(1904),  209  Pa.  419,  58  Atl.  805; 
A  very  v.  Myers  (1882),  60  Miss. 
367. 

If  he  actually  participates  as  a 
partner  he  will  be  personally  liable 
for  the  debts.  Citizens  Mut.  Ins. 
Co.  v.  Ligon  (1881),  59  Miss.  305; 
Alsop  v.  Mather  (1831),  8  Conn. 
584,  21  Am.  Dec.  703.  So  if  the 
business  is  continued  by  agreement 
with  him,  City  Nat.  Bank  v.  Stone 
(1902),  131  Mich.  588,  92  N.  W.  99; 
but  even  in  such  cases  he  would  not 
be  personally  liable  for  debts  con- 
tracted in  the  deceased  partner 's 
lifetime:  Mattison  v.  Farnham 
(1890),  44  Minn.  95,  46  N.  W.  347. 
When  he  thus  participates  by  direc- 
tion of  the  will,  he  may  be  reim- 
bursed out  of  the  assets  properly 
devoted  to  the  business.  Wild  v. 
Davenport,  supra. 

38  See  Smith  v.  Ayer  (1879),  101 
U.  S.  320,  25  L.  ed.  955;  Jones  v. 
Walker  (1880),  103  U.  S.  444,  26  L. 
ed.  404,  Mechem's  Gas.  509;  Bur- 
well  v.  Mandeville  (1844),  2  How. 
(43  U.  S.)  560,  11  L.  ed.  378;  Pit- 
kin  v.  Pitkin  (1829),  7  Conn.  307, 


18  Am.  Dec.  Ill;  Brasfield  v.  French 
(1882),  59  Miss.  632;  Furst  v.  Arm- 
strong (1902),  202  Pa.  348,  51  Atl. 
996,  90  Am.  St.  E.  653;  Davis  v. 
Christian  (1859),  15  Gratt.  (Va.) 
11;  Ex  parte  Garland  (1803),  10 
Ves.  110;  Ex  parte  Eichardson 
(1818),  3  Madd.  138. 

As  to  the  application  of  payments 
made  where  the  business  is  continued 
after  the  dissolution,  see  Wiesen- 
feld  v.  Byrd  (1881),  17  S.  Car.  106; 
Tootle  v.  Jenkins  (1891),  82  Tex. 
29,  17  S.  W.  519;  Stanwood  v.  Owen 
(1859),  80  Mass.  (14  Gray)  195. 

39  See      Ferris      v.      Van      Ingen 
(1899),  110  Ga.  102,  34  S.  E.  347. 

40  See  Willis  v.  Sharp  (1889),  113 
N.  T.  586,  21  N.  E.  705,  4  L.  E.  A. 
493;    Stewart    v.   Eobinson    (1889), 
115  N.  Y.  328,  22  N.  E.  160,  35  L. 
E.     A.     410;     Vincent     v.     Martin 
(1885),  79  Ala.  540.   Compare  Shaw, 
et    al,    Appellants    (1889),    81    Me. 
207,   16   Atl.   662.     Such   provisions 
must    be    clear    and    unequivocal    in 
order  to  justify  continuance:   Alex- 
ander v.  Lewis  (1877),  47  Tex.  481. 

In  Stanwood  v,  Owen  (1859),  80 


351 


§§409,410]  LAW   OP  PARTNERSHIP 

to  be  construed  according  to  their  terms,  but,  in  a  number  of 
cases,  they  have  been  held  to  involve  the  entire  estate.41 

Provisions  of  the  latter  sort  could  not  ordinarily  be  executed 
if  there  were  existing  general  creditors  of  the  deceased  who  in- 
sisted upon  immediately  subjecting  the  residue  of  the  estate  to 
the  payment  of  their  claims.42 

§409.  Continuing  in  pursuance  of  personal  agreements. — 

"Where  there  is  no  provision  either  in  the  will  of  the  deceased 
partner  or  in  the  partnership  articles,  the  persons  who  are  en- 
titled to  the  deceased  partner's  share  may  consent  to  a  continu- 
ance of  the  business  on  such  terms  as  they  may  deem  advisable ; 
and  such  consent  of  competent  parties  will,  at  least,  estop  them 
from  complaining  of  any  proceeding  covered  by  it,43  and  by  their 
contract  they  may  bind  themselves  to  contribute  to  the  payment 
of  debts  and  expenses  on  such  terms  as  they  see  fit  to  make. 

Such  an  obligation  may  undoubtedly  arise  by  implication,  as 
where,  without  express  arrangements,  there  is  yet  a  tacit  ac- 
quiescence in  the  fact. 

§410.  Provisions  that  survivor  shall  acquire  interest  of  de- 
ceased.— Partnership  articles  not  infrequently  provide  that,  in 
case  of  the  death  of  a  partner,  his  interest  shall  or  may  be  pur- 
chased by  the  survivor  upon  terms  or  in  a  manner  stated.  Such 
provisions  are  entirely  lawful,  and  often  highly  desirable.  Where 
they  possess  the  requisite  characteristics  of  certainty  and  con- 
sideration, such  agreements  are  capable  of  being  specifically  en- 
Mass.  (14  Gray)  195,  it  is  held  that  vocable  by  death;  Laughlin  v. 
subsequent  creditors  may  not  prove  Lorenz  (1864),  48  Pa.  275,  86  Am. 
their  claims  directly  against  the  Dec.  592.  (See  comments  on  this 
estate  of  the  deceased  partner  in  case  in  Wilcox  v.  Derickson  (1895), 
competition  with  his  individual  168  Pa.  331,  337,  31  Atl.  1080.) 
creditors.  42  See  Stanwood  v.  Owen,  supra; 

41  See  Blodgett  v.  American  Na-  Dowse  v.  Gorton  [1891],  App.  Gas. 
tional  Bank  (1881),  49  Conn.  9,  190. 

where  the  court  speaks  of  the  pro-  43  See  Robinson  v.  Simmons, 
vision  as  conferring  a  power  coupled  supra;  Poole  v.  Munday  (1869),  103 
with  an  interest,  and  therefore  irre-  Mass.  174. 

352 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS        [§  411 


forced.44    They  may  also  be  so  framed  as  to  be  practically  auto- 
matically operative,  at  least  as  between  the  parties.45 

In  a  late  case  an  agreement  that  the  survivor  should  have  the 
entire  interest  without  paying  anything  for  it,  and  that  the 
interest  of  any  partner  should  cease  on  his  death,  was  denied 
enforcement.46 

§411.  Liability  of  estate  of  deceased  partner  for  existing 
debts. — Although,  as  has  been  seen,47  causes  of  action  against 
the  firm,  at  law,  survive  against  the  surviving  partners  only, 
the  estate  of  the  deceased  partner  is  not  thereby  released  from 
all  liability  on  existing  debts  to  the  partnership  creditors.48 


44  See      Maddock      v.       Astbury 
(1880),  32  N.  J.  Eq.  181,  Mechem's 
Cas.   936;    McKinnon   v.   McKinnon 
(1893),  5  C.  C.  A.  530,  56  Fed.  409; 
Murphy     v.     Murphy     (1914),     217 
Mass.  233,  104  N.  E.  466;   Gaut  v. 
Keed    (1859),  24   Tex.   46,  76  Am. 
Dec.  94;  Bankin  v.  Newman  (1896), 
114  Cal.  635,  46  Pae.  742,  34  L.  E. 
A.  265;  Scharringhausen  v.  Luebsen 
(1893),    52    Mo.     337     (optional); 
Kaufmann    v.    Kaufmann     (1913), 
239  Pa.  42,  86  Atl.  634;  Morris  v. 
Kearsley  (1837),  2  Y.  &  C.  Ex.  139; 
Essex    v.    Essex    (1855),    20    Beav. 
442;     King    v.    Chuck     (1853),    17 
Beav.     325;     Hibben     v.     Collister 
(1900),  30  Can.  Sup.  Ct.  459.     See, 
also,  Fitzsimmons  v.  Lindsay  (1903), 
205  Pa.  79.    But  if  not  enforceable 
as  a  contract,  it  must,  it  is  said,  be 
executed  as  a  will  so  as  to  be  en- 
forceable as  such.    Ferrara  v.  Eusso 
(1917),  40  E.  I.   533,   102  Atl.   86, 
L.   E.   A.    1918   B   905.     See,  also, 
Gomez  v.  Higgins   (1900),  130  Ala. 
493,  30  So.  417. 

45  See   In  re   Simpson    (1874),   9 
Ch.  App.  572,  where  Mellish,  L.  J., 
said:     "I  am  of  opinion  that  the 
whole  interest  in  the  assets  passed 

Mech.  Part.— 23  353 


immediately  on  the  death  of  one 
partner  to  the  survivors. ' '  The 
estate  of  the  deceased  then  has,  of 
course,  the  right  to  recover  the  com- 
pensation stipulated  for  in  the 
agreement. 

46  Fleming  v.  Fleming   (1919)   — 
Iowa  — ,  174  N.  W.  946.     Compare 
Stewart   v.   Todd    (1919),  —  Iowa 
— ,  173  N.  W.  619. 

47  See  ante,  §  402. 

48  As  to  the  debts  existing  at  the 
time  of  the  dissolution  the  estate  of 
the  deceased  partner  remains  liable 
(though   the  form   of   procedure   is 
changed)    to    the   partnership    cred- 
itors   (unless  there   has  been  a  re- 
lease,  a   novation,   or   something   of 
that  sort  as  discussed  post,  §429), 
and    this    is    true,    notwithstanding 
that  there  may  have  been  dealings 
with  the  survivors   since  the   death. 
See    Mason   v.    Tiffany    (1867),    45 
111.  392;   McGill  v.  McGill    (1859), 
2  Mete.   (Ky.)   258;  Daniel  v.  Cross 
(1796),   3  Ves.  277;    Sleech's  Case 
(1816),  1  Meriv.  530;   Devaynes  v. 
Noble    (1831),   2   Euss.   &   M.   495; 
Winter  v.  Innes  (1838),  4  Mylne  & 
C.  101. 


§411] 


LAW  OF  PARTNERSHIP 


The  surviving  partners  who  had  paid  the  debt  might  have  con- 
tribution in  equity  from  the  estate  of  the  deceased  partner,49 
and  this  equity  of  the  surviving  partners  may  be  extended  to 
the  creditor  himself.  But  more  than  this,  it  may  be  said  that 
there  is  an  independent  right  of  the  creditor  in  equity  to  proceed 
as  though  the  partnership  obligation  were  joint  and  several.60 
At  any  rate,  the  rule  is  now  established  in  England  and  many 
of  the  United  States  that  the  creditor  may  proceed  either  against 
the  survivors  at  law,  or,  without  having  any  recourse  to  them 
or  attempting  to  exhaust  the  partnership  assets,  he  may  in  equity 
proceed  at  once  against  the  estate  of  the  deceased  partner.51 
In  several  states  by  statute  this  method  of  procedure  is  expressly 
authorized.62  Other  states,  however,  such  as  New  York,  Georgia, 
Wisconsin  and  perhaps  some  others  have  declined  to  adopt  this 
rule,  and  since  the  survivor  is  the  one  who  has  the  possession 
and  administration  of  the  partnership  assets,  permit  recourse 
to  the  estate  of  the  deceased  only  after  the  plaintiff  has  ex- 


49  If    the    surviving    partner   has 
paid  the  debts  and  there  was  a  de- 
ficiency of  assets  for  that  purpose, 
he  may  have  contribution  from  the 
estate  of  the  deceased  partner.     In 
some  states  he  may  keep  that  estate 
open  by   filing  a  contingent  claim. 
If  that  estate  has  been  distributed 
before  he  can  present  his  claim,  he 
may,   in   some   states,  recover  from 
the   distributees  who   have  received 
the  assets  of  that  estate.    See  Blake- 
ly  v.  Smock  (1897),  96  Wis.  611,  71 
N.  W.  1052;  Logan  v.  Dixon  (1889), 
73  Wis.  533,  41  N.  W.  713. 

50  See  the   discussions  in  Kendall 
v.    Hamilton    (1879),    4    App.    Gas. 
504,  Gilm.  Cas.  293,  and  especially 
Lord  Selborne's  opinion  at  p.   538. 
See,    also,    Beresford    v.    Browning 
(1875),  L.  E.  1  Ch.  D.  30. 

61  See  .Doggett  v.  Dill  (1884),  108 
111.  560,  48  Am.  Eep.  565,  Mechem  'a 
Cas.  513,  Burd.  Cas.  495,  Gilm.  Cas. 
300,  where  many  cases  are  collected; 


Nelson  v.  Hill  (1847),  5  How.  (U. 
S.)  127;  Fillyan  v.  Laverty  (1850), 
3  Fla.  72;  Freeman  v.  Stewart 
(1866),  41  Miss.  138;  Newman  v. 
Gates  (1905),  165  Ind.  171,  72  N. 
E.  638;  Camp  v.  Grant  (1851),  21 
Conn.  41,  54  Am.  Dec.  321;  Union 
Trust  Co.  v.  Shoemaker  (1913),  258 
111.  564,  101  N.  E.  1050. 

Proceedings  in  probate  courts  are 
usually  "equitable"  within  this 
rule. 

Where  the  obligation  was  several 
as  well  as  joint,  the  creditor  may 
proceed  directly  against  the  estate 
of  the  deceased  partner.  Filley  v. 
Phelps  (1847),  18  Conn.  294. 

52  Thus,  see  Camp  v.  Grant 
(1851),  21  Conn.  41,  54  Am.  Dec. 
321;  Manning  v.  Williams  (1851),  2 
Mich.  105;  Ealston  v.  Moore  (1885), 
105  Ind.  243,  4  N.  E.  673;  Blair  v. 
Wood  (1884),  108  Pa.  278;  McLain 
v.  Carson  (1842),  4  Ark.  164,  37 
Am.  Dec.  777,  Gilm.  Cas.  304. 


354 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS     [§§  412-414 

hausted  his  remedies  against  the  survivor.53  In  some  of  these 
states,  this  rule  has  now  been  changed  by  statute.54 

As  will  be  seen  hereafter,  partnership  creditors  pursuing  the 
separate  estate  of  the  deceased  partner  in  equity  are  usually 
postponed  until  his  individual  creditors  have  been  satisfied.55 

The  Uniform  Partnership  Act  provides  that  "The  individual 
property  of  a  deceased  partner  shall  be  liable  for  all  obligations 
of  the  partnership  incurred  while  he  was  a  partner,  but  subject 
to  the  prior  payment  of  his  separate  debts. ' ' 56 

2.  Dissolution  by  Bankruptcy,  Insolvency,  Assignment,  Etc. 

§  412.  In  general. — Somewhat  similar  questions  are  raised 
where  the  partnership  is  dissolved  by  the  bankruptcy,  insol- 
vency or  assignment  of  some  or  all  of  the  partners,  though  the 
cases  are  obviously  not  identical  with  that  of  the  death  of  a 
partner  which  completely  removes  him  from  the  field  of  action. 
The  law  as  to  some  of  the  points  is  not  entirely  clear. 

§  413.  Bankruptcy,  insolvency  or  assignment  of  entire  firm. 

— Where  all  of  the  partners,  in  their  partnership  relation,  i.  e., 
the  firm,  become  bankrupt,  insolvent  in  the  statutory  sense,  or 
assign  all  of  the  partnership  property  for  the  benefit  of  creditors, 
the  effect  upon  their  authority  thereafter  to  administer  the  part- 
nership affairs,  is  usually  not  difficult  of  determination.  Such 
an  event  ordinarily  results  in  the  appointment  of  some  one  else 
to  act  in  the  matter,  and  terminates  or  suspends  the  authority 
of  the  partners. 

§  414.  Bankruptcy  of  one  partner — Solvent  partner  may  ad- 
minister.— The  present  bankruptcy  act  provides  that  "in  the 
event  of  one  or  more  but  not  all  of  the  members  of  a  partner- 

53  See  Pope  v.  Cole  (1873),  55  N.  hugh  (1918),  167  Wis.  355,  167  N. 
Y.  124,  14  Am.  Rep.  198 ;  Sherman  W.  455 ;  Cf.  Seligman  v.  Friedlander 
v.  Kreul  (1877),  42  Wis.  33;  Pullen  (1910),   138   N.   Y.   App.   Div.   784, 
v.    Whitfield    (1875),    55    Ga.    174;  123  N.  Y.  S.  583,  199  N,  Y.  373,  92 
Pearson  v.  Keely  (1845),  6  B.  Mon.  e  N.  E.  1047. 

(Ky.)  128,  43  Am.  Dec.  160.  55  See  post,  §  453. 

54  See  Smith  Lumber  Co.  v.  Fitz-          56  See.  36  (4). 

355  v 


§  415]  LAW  OP  PARTNERSHIP 

ship  being  adjudged  bankrupt,  the  partnership  property  shall 
not  be  administered  in  bankruptcy,  unless  by  consent  of  the 
partner  or  partners  not  adjudged  bankrupt;  but  such  partner 
or  partners  not  adjudged  bankrupt  shall  settle  the  partnership 
business  as  expeditiously  as  its  nature  will  permit  and  account 
for  the  interest  of  the  partner  or  partners  adjudged  bank- 
rupt." 67  This  statute  clearly  gives  to  the  solvent  partner,  unless 
he  relinquishes  it,  the  right  to  administer  the  partnership  assets, 
including,  of  course,  the  right  to  the  possession  and  control  of 
them  for  that  purpose.58  This  right  of  administration  is  said  to 
be  a  personal  one,  which  the  solvent  partner  cannot  transfer  to 
a  third  person.69  In  suing  for  the  recovery  of  the  partnership 
assets  the  solvent  partner  may  doubtless  join  the  representatives 
of  the  bankrupt  partner,  though  the  latter  would  undoubtedly 
be  entitled  to  an  indemnity  against  the  costs  and  expenses  of 
unsuccessful  actions.60 

§415.  Insolvency,  assignment,  selling  out,  of  one  partner. — 

As  has  been  seen,  a  dissolution  of  the  partnership  does  not  nec- 
essarily result  from  the  mere  insolvency  of  one  partner;  but 
where  he  assigns  all  his  property  for  the  benefit  of  his  creditors 
or  where  his  entire  interest  in  the  partnership  is  seized  and  sold 
by  his  creditors,  a  dissolution  will  frequently  result.61  In  such 

57  The  Bankruptcy  Act  of   1898,  431;  Vetterleiir  v.  Barnes  (1880),  6 

§  5,  subd.  h.     See  Appendix.    As  to  Fed.  693. 

the  effect  on  his  partnership  liability          60  See  Ex  parte  Owen  (1884),  13 

of  a  discharge  in  bankruptcy  of  one  Q.  B.  Div.    113;    Heilbut   v.   Nevill 

partner,    see    Loomis    v.    Wallblom  [1869],  4  L.  B.  C.  P.  354;  Lindley 

(1905),   94  Minn.   392,   102  N.  W.  on  Partnership    (7th  ed.),  pp.  326, 

1114,  69  L.  E.  A.  771,  Gilm.  Cas.  714,  note  m,  739. 
584     (discharges    him) ;     Corey     v.          In  Ex  parte  Owen,  supra,  Cotton, 

Perry   (1877),  67  Me.   140,  24  Am.  L.  J.,  said:     "In  my  opinion,  when 

Eep.   15,  Burd.  Cas.  466    (does  not  one  partner  in  a  firm  has  become  a 

necessarily).  bankrupt,    the    solvent   partner    has 

68  See  In  re  Bertenshaw    [19071,  the  right  to  get  in,  and  to  insist  on 

85  C.  C.  A.  6',  157  Fed.  363,  17  L.  getting   in,    the    assets    of   the    dis- 

K.   A.    (N.    S.)    886,   13   Ann.   Cas.  solved  partnership,  and  has  even  a 

986.  right   to   use   for  that   purpose   the 

59Fraser  v.  Kershaw  [1856],  2  K.  name  of  the  trustee  in  bankruptcy, 

&  J.  496,  s.  C.,  25  L.  J.  Ch.  445,  2  on  giving  him  an  indemnity." 
Jur.  part  I   (N.  S.)   880,  4  W.  E.          61  See  ante,  §§363,  364. 

356 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS        [§  415 


a  situation  the  tendency  of  the  more  modern  cases  is  to  treat 
the  solvent  partner  very  much  like  a  surviving  partner  so  far 
as  the  possession  and  administration  of  the  assets  are  concerned. 
Some  of  the  cases  speak  of  the  legal  title  as  surviving  in  him,62 
but  this  seems  to  be  doubtful,63  though  he  doubtless  has  the 
right  to  possess,  control  and  dispose  of  the  assets  for  the  pur- 
poses of  closing  up  the  business.64 


Under  Uniform  Partnership  Act, 
sec.  27,  a  dissolution  does  not  neces- 
sarily result. 

62  See  Ogden  v.  Arnot   (1883),  29 
Hun    (N.   Y.)    146,   Mechem's   Gas. 
996,  Burd.  Gas.  461;  Eussell  v.  Cole 
(1896),  167  Mass.  6,  44  N.  E.  1057, 
57  Am.  St.  E.  432,  Burd.  Gas.  469; 
Horton's    Appeal     (1850),    13    Pa. 
67;    Harvey   v.    Crickett    (1816),    5 
Maule  &   Sel.  336;   Fern  v  Gushing 
(1849),  4  Gush.  (Mass.)  357,  Ames' 
Gas.  271,  Burd.  Gas.  464,  Gilm.  Gas. 
581;   Fish  v.   Thompson    (1895),   68 
Vt.  273,  35  Atl.  174,  Burd.  Gas.  3. 
Gompare  Hubbard  v.  Guild   (1853), 
8  N.  Y.  Super.  Ct.  662;   Murray  v. 
Murray    (1821),    5    Johns.    Ch.    (N. 
Y.)    60,  Burd.  Gas.  451,  Gilm.  Gas. 
578. 

63  See  as  to  rights  of  action,  sol- 
vent partner  and  assignee  must  join 
as     plaintiffs:     Pugh     v.     Holliday 
(1854),   3   Ohio  St.   284;    Halsey   v. 
Norton  (1871),  45  Miss.  703,  7  Am. 
Eep.  745,  Mechem's  Gas.  447,  Gilm. 
Gas.   583.     Action  properly  brought 
in  names  of  both  partners,  notwith- 
standing      insolvency       proceedings 
against  one  of  them.  Eussell  v.  Cole, 
supra. 

64 See  Horton's  Appeal  (1850), 
13  Pa,  St.  67;  Chase  v.  Scott 
(1871),  33  Iowa  309;  Eenton  v. 
Chaplain  (1852),  9  N.  J.  Eq.  62; 
Miller  v.  Brigham  (1875),  50  Gal. 
615;  Eeece  v.  Hoyt  (1853),  4  Ind. 


169  (where  one  sells  out,  other  has 
right  to  possession  and  winding 
up);  Hamill  v.  Hamill  (1867),  27 
Md.  679  (same  where  one  ab- 
sconds);  McGlensey  v.  Cox  (1852), 
1  Am.  L.  Eeg.  34,  1  Phila.  (Pa.) 
378.  The  court  will  not  interfere 
with  the  right  of  the  remaining  part- 
ner to  administer  except  upon  a 
showing  of  incompetency,  misman- 
agement or  improper  conduct:  Eeece 
v.  Hoyt,  supra;  McGlensey  v.  Cox, 
supra. 

In  Ogden  v.  Arnot,  supra,  it  is 
held  that  the  solvent  partner  may 
not  only  sell  the  firm  property  for 
the  purposes  of  administration,  but 
may  also  mortgage  it  to  secure  a 
firm  debt,  even  though  this  may  re- 
sult in  a  preference  to  the  creditor 
so  secured,  in  a  state  wherein  a 
debtor  may  prefer  creditors.  In 
Eenton  v.  Chaplain  [1852],  9  N.  J. 
Eq.  62,  the  court  said:  "It  is  true 
the  partnership,  by  the  sale,  is  dis- 
solved. But  why  should  the  court 
interfere  with  the  other  partner  in 
settling  up  the  concerns  of  the  part- 
nership? Why  should  its  manage- 
ment be  taken  out  of  his  hands  and 
transferred  to  an  officer  of  this 
court?  The  object  in  view  is  to  se- 
cure to  the  purchaser  the  benefit  of 
his  purchase.  But  the  rights  of  the 
•solvent  partner  are  entitled  to  some 
regard,  and  the  interests  of  the  cred- 
itors of  the  firm  are  to  be  protected. 


357 


§§416,417]  LAW  OF  PARTNERSHIP 

If  what  was  seized  or  assigned  were  not  his  entire  interest,  but 
only  a  portion  of  it,  or  only  his  interest  in  certain  specified 
chattels, — granting  that  that  were  possible, — then  the  effect  as 
an  act  of  dissolution  seems  less  clear. 

§  416.  Although  the  continuing  partner  is  here  spoken 

of  as  the  solvent  partner,  it  is  doubtless  true  that,  even  if  he 
were  insolvent  in  the  legal  sense,  he  would  nevertheless,  if  un- 
disturbed in  his  possession  and  not  proceeded  against,  be  per- 
mitted to  close  up  the  business. 

If  there  were  several  partners,  and  the  interests  of  more  than 
one  were  successively  seized  by  their  individual  creditors,  but 
one  solvent  partner  remained,  he  would  doubtless  have  the  right 
to  administer.65 

If  his  interest  also  were  finally  seized  by  his  separate  creditor, 
the  firm  title  would  not  thereby  be  necessarily  divested,  nor  his 
right  to  continue  the  settlement  necessarily  be  terminated,  al- 
though, as  a  practical  matter,  such  a  situation  would  be  likely  to 
lead  to  bankruptcy  or  insolvency  proceedings  against  the  part- 
nership. 

§417.  Rights  of  assignee  of  such  partner's  interest. — 

As  has  already  been  seen,  one  who  acquires  the  interest  of  one 

Who  so  competent  to  protect  and  •  than  the  debtor  himself.  The  solv- 
secure  those  rights  and  interests  as  ent  partner  has  a  specific  lien  upon 
the  solvent  partner,  who  has  every-  the  property,  to  liquidate  the  part- 
thing  at  stake,  and  whose  familiar-  nership  debts,  and  upon  the  residue 
ity  with  the  engagements  and  trans-  until  all  the  equities  between  the 
actions  of  the  concern  gives  him  very  partners  are  settled. ' ' 
greatly  the  advantage  over  anyone  The  contrary  seems  to  have  been 
else  that  could  be  substituted  for  held  in  Hubbard  v.  Guild  [1853],  8 
the  purpose?  Does  it  follow  be-  Super.  Ct.  N.  Y.  (1  Duer)  662. 
cause  one  partner  has  become  in-  65  See,  for  example,  the  discussion 
solvent,  the  other  is  dishonest,  and  in  such  cases  as  Menagh  v.  Whit- 
must  be  dealt  with  as  a  wrong-doer  well  (1873),  52  N.  Y.  146,  11  Am. 
— be  deprived  of  his  property,  and  Rep.  683,  Mechem's  Gas.  194,  Ames' 
subjected  to  great  embarrassment  Gas.  229,  Burd.  Gas.  222,  Gilm.  Gas. 
and  unnecessary  expense  and  loss?  251;  Doner  v.  Stauffer  (1829),  1 
What  rights  and  interests  does  the  Pen.  &  W.  (Pa.)  198,  21  Am.  Dec. 
purchaser  acquire,  and  how  does  this  370,  Ames'  Gas.  302,  Burd.  Gas.  218, 
purchase  affect  the  other  partner?  Gilm.  Gas.  247;  Coover's  Appeal 
He  stands  in  no  better  situation  (1857),  29  Pa.  9,  20  Am.  Dec.  149. 

358 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS 


partner  only  in  the  partnership,  as  by  attachment  or  execution 
sale,  mortgage  or  assignment,  does  not  thereby  become  a  partner 
with  the  solvent  partner, — the  delectus  personae  prevents  that, — 
nor  does  he  thereby  acquire  the  right  to  join  with  the  solvent 
partner  in  continuing  or  closing  up  the  business.66  He  does, 
however,  acquire  the  right  to  demand  that  the  solvent  partner 
shall  close  up  the  affairs  of  the  partnership  with  reasonable 
despatch  under  the  terms  of  the  partnership  and  account  to 
him  for  what  remains,  if  anything,  of  the  pro  rata  share  of  the 
partner  whose  interest  was  so  acquired.  If  the  partnership  were 
entirely  insolvent,  he  would,  of  course,  get  nothing.  His  remedy 
to  ascertain  and  secure  his  interest  would  ordinarily  be  by  a 
bill  for  an  accounting  against  the  settling  partner.67  Some  of 
the  cases  speak  of  him  as  a  tenant  in  common  with  the  other 
partner,68  but  that  is  not  a  wholly  accurate  designation. 

While  he  has  thus  a  right  to  secure  whatever  share  may  be 
coming  to  hjm,  he  would  not,  merely  by  acquiring  the  interest, 

66  The  Uniform  Partnership  Act,  67  See  Claggett  v.  Kilbourne 

(1861),  66  U.  S.  (1  Black)  346,  17 
L.  ed.  213;  Lothrop  v.  Wightman 
(3861),  41  Pa.  297;  Barrett  v.  Mc- 
Kenzie  (1877),  24  Minn.  20;  Farley 
v.  Moog  (1885),  79  Ala.  148,  58 
Am.  Eep.  585. 

Under  the  Uniform  Partnership 
Act,  Sec.  27  (2),  if  the  assignment 
results  in  a  dissolution,  "the  as- 
signee is  entitled  to  receive  his  as- 
signor's interest,  and  may  require 
an  account  from  the  date  only  of 
the  last  account  agreed  to  by  all  the 
partners. ' ' 

68  See  Murray  v.  Murray  (1821), 
5  Johns.  Ch.  (N.  Y.)  60,  Burd.  Gas. 
451,  Gilm.  Gas.  578  (bankruptcy 
case);  Halsey  v.  Norton  (1871),  45 
Miss.  703,  7  Am.  Rep.  745,  Me- 
chem's  Gas.  447,  Gilm.  Gas.  583 
(bankruptcy  case). 


which  provides  ISec.  25  (2)  (b)] 
that  "a  partner's  right  in  specific 
partnership  property  is  not  assign- 
able except  in  connection  with  the 
assignment  of  the  rights  of  all  the 
partners  in  the  same  property," 
also  provides  (See.  27)  that  "A 
conveyance  by  a  partner  of  his  in- 
terest in  the  partnership  does  not  of 
itself  dissolve  the  partnership,  nor, 
as  against  the  other  partners,  in  the 
absence  of  agreement,  entitle  the 
assignee,  during  the  continuance  of 
the  partnership,  to  interfere  in  the 
management  or  administration  of 
the  partnership  business  or  affairs, 
or  to  require  any  information  or  ac- 
count of  partnership  transactions, 
or  to  inspect  the  partnership  books; 
but  it  merely  entitles  the  assignee  to 
receive,  in  accordance  with  his  con- 
tract, the  profits  to  which  the  assign- 
ing partner  would  otherwise  be  en- 
titled. ' ' 


359 


§§418-420]  LAW  OF  PARTNERSHIP 

become  liable  for  any  deficiency  in  assets  to  pay  partnership 
debts  to  which  the  partner,  whose  interest  he  acquired,  might 
have  been  liable. 

As  has  been  already  seen,  the  Uniform  Partnership  Act  gives 
the  purchaser  of  a  partner's  interest,  in  a  partnership  termi- 
nated or  determinable  at  will,  the  right  to  apply  to  a  court  for  a 
dissolution.69 

§418.  Other  causes. — Similar  rules  would  doubtless  be  ap- 
plied where  the  dissolution  results  from  marriage,  insanity,  and 
the  like,  leaving  part  of  the  partners  legally  competent  and  the 
other  incompetent.  The  legally  competent  would  doubtless  be 
ordinarily  authorized  and  permitted  to  act  in  closing  up  the 
business. 

3.  Dissolution  by  Judicial  Decree. 

§  419.  Receivership  usually  results. — Where  the  partnership 
is  dissolved  by  judicial  decree, — a  matter  considered  in  an  earlier 
section,70  there  will  frequently  if  not  usually  be  a  receiver  ap- 
pointed,71 under  whose  control  the  partnership  affairs  will  be 
closed  up.  Such  an  appointment  will  ordinarily  supersede  the 
administration  of  partnership  affairs  by  the  partners  themselves. 

4.  Dissolution  by  Other  Causes. 

§420.  Rights  and  liabilities  of  partners  after  dissolution — 
In  general. — Attention  must  next  be  given  to  the  cases  wherein 
the  partnership  is  dissolved  by  lapse  of  time,  mutual  consent, 
the  act  of  one  partner,  or  other  acts  or  events  which  do  not  affect 
the  existence,  status,  liberty  or  capacity  to  act,  of  any  of  the 
partners. 

Whatever  rights  have  then  vested  in  and  accrued  to  the  part- 
ners remain  undestroyed  by  the  dissolution.  Their  property  is 
still  theirs;  their  rights  in  action  are  still  enforceable.  Only 
those  rights  which  depend  upon  the  continuance  of  the  part- 
nership will  be  affected. 

69  See.  32  (2).  71  See  ante,  §  231. 

70  Ante,  §§373,  374. 

360 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS    [§§  421,  422 

Existing  liabilities,  of  course,  will  not  be  discharged.  Con- 
tinuing contracts  will  usually  be  affected  only  where  the  con- 
tinuance of  the  partnership  was  an  express  or  implied  condi- 
tion.72 

§421.  Authority  of  firm,  as  agent  for  third  persons,  after 
dissolution. — In  accordance  with  the  rule  referred  to  in  an 
earlier  section,78  it  is  held  that  where  a  firm  has,  as  a  partner- 
ship, been  appointed  agent  for  a  third  person,  the  dissolution 
of  the  partnership  will  ordinarily  terminate  the  agency.74 

§422.  Rights  of  partners  after  dissolution  under  Uniform 
Partnership  Act — Effect  of  wrongful  dissolution. — The  Uni- 
form Partnership  Act  provides  that  when  the  partnership  is  dis- 
solved in  any  way,  except  in  contravention  of  the  partnership 
agreement,  each  partner  shall  have  the  right  to  have  the  debts 
paid  out  of  the  assets  and  receive  his  share  of  the  surplus  in  cash. 
But  where  the  partnership  is  dissolved  by  the  rightful  expulsion 
of  a  partner,  or  any  partner  causes  dissolution  in  contravention 
of  the  partnership  agreement,  the  rights  of  such  partner  are 
much  limited.  In  the  former  'case,  he  is  entitled  "to  receive  in 
cash  only  the  net  amount  due  him  from  the  partnership ; ' '  and 
in  the  other  case,  he  is  liable  to  his  copartners  for  damages  for 
the  wrongful  dissolution,  and  the  other  partners  may,  if  they 
so  desire,  continue  the  business  for  the  residue  of  the  term  and 
keep  and  use  all  the  partnership  property,  upon  giving  him  a 
bond  to  pay,  or  in  fact  paying,  the  value  of  his  interest  less 
these  damages,  and  upon  indemnifying  him  against  all  present 
and  future  partnership  debts.  His  interest  in  the  good  will  is 
not  to  be  considered.  If  the  other  partners  do  not  continue  the 
business,  he  is  entitled  to  receive  his  share  less  the  damages.76 

''Unless  otherwise  agreed,  the  partners  who  have  not  wrong- 
fully dissolved  the  partnership  *  *  *  have  the  right  to  wind 
up  the  partnership  affairs."  76 

* 

72 See  Brace  v.  Calder  [1895],  2  L.  E.  A.  1915  C  576;  Holbert  v. 
Q.  B.  253.  Keller  (1913),  161  Iowa  723,  142 

73  See  ante,  §  401.  N.  W.  962. 

74  See     Sehlau     v.     Enzenbacher          75  See.  38.     Appendix. 
(1914),  265  111.  626,  107  N.  E.  107,          76  Sec.  37. 

361 


§423] 


LAW  OP  PARTNERSHIP 


§423.  Authority  of  partners  after  dissolution  —  Authority 
continues  for  the  purpose  of  closing  up  the  business. — Such 
a  dissoluti6n  of  the  partnership  terminates  entirely  the  authority 
of  each  partner  to  continue  to  bind  his  partners  by  new  con- 
tracts. The  authority  of  each  partner  is  thenceforward  limited 
to  closing  up  the  partnership  affairs,  but  for  this  purpose  his 
authority  is  deemed  to  continue,  with  all  the  rights  and  incidents 
as  before.  Thus  either  partner  may,  after  dissolution,  receive 
payment  of  firm  debts  and  give  discharges  therefor;  sell  part- 
nership property ;  pay  firm  debts ;  complete  unfinished  but  bind- 
ing undertakings ;  accept  or  give  proper  notices  respecting  them ; 
make,  receive  or  waive  incidental  demands ;  or,  generally,  do  any 
other  act  respecting  the  closing  up  of  previous  transactions 
which  he  might  do  if  the  partnership  still  continued.77 

Unless  they  agree  otherwise,  each  of  the  former  partners  has 
an  equal  right  to  the  possession  of  the  assets,  and  is  under  an 


77  See  Major  v.  Hawkes  (1850), 
12  111.  298,  Gilm.  Gas.  403;  Heartt 
v.  Walsh  (1874),  75  111.  200;  Euff- 
ner  v.  Hewitt  (1874),  7  W.  Va. 
585;  Seldner  v.  Mt.  Jackson  Nat. 
Bank  (1887),  66  Md.  488,  59  Am. 
Eep.  190;  Perkins  v.  Butler  Co. 
(1895),  44  Neb.  110,  62  N.  W.  308; 
Western  Stage  Co.  v.  Walker  (1856), 
2  Iowa  504,  65  Am.  Dee.  789 ;  Davis 
v.  Megroz  (1893),  55  N.  J.  L.  427; 
Lapenta  v.  Lettieri  (1899),  72  Conn. 
377,  44  Atl.  730,  77  Am.  St.  B.  315; 
Page  v.  Wolcott  (1860),  81  Mass. 
(15  Gray)  536;  Gordon  v.  Albert 
(1897),  168  Mass.  150,  46  N.  E. 
423;  Holmes  v.  Shands  (1854),  27 
Miss.  40. 

In  Butchart  v.  Dresser  (1853),  4 
DeG.  M.  &  G.  542,  10  Hare  453, 
Ames'  Gas.  563,  Burd.  Gas.  363,  it 
•vvas  held  that  the  mere  fact  that  the 
two  partners  differed  as  to  whether 
an  existing  contract  should  be  per- 
formed or  broken  did  not  deprive 


one  of  his  authority  to  perform  it. 

Demand  of  payment  to  charge  en- 
dorser of  note  may  be  sufficiently 
made  of  one  of  former  firm  of 
makers:  Gates  v.  Beecher  (1875), 
60  N.  Y.  518,  19  Am.  Eep.  207,  Me- 
chem's  Gas.  1020,  Burd.  Gas.  372. 
Waiver  of  demand  made  by  one 
after  dissolution  will  bind  other 
partners:  Darling  v.  March  (1842), 
22  Me.  184,  Gilm.  Gas.  409;  Seldner 
v.  Bank  (1887),  66  Md.  488,  8  Atl. 
262,  59  Am.  Eep.  190.  Notice  of  dis- 
honor to  one  member  of  partnership 
dissolved  by  war  is  sufficient:  Hub- 
bard  v.  Matthews  (1873),  54  N.  Y. 
43,  13  Am.  Eep.  562. 

There  being  no  assignment,  in  law 
or  in  fact,  and  no  survivorship  here, 
the  general  rules  as  to  parties  to 
action  (ante,  §  324,  et  seq.),  are  not 
ordinarily  affected  by  the  dissolu- 
tion: See  Fish  v.  Gates  (1882),  133 
Mass.  441;  Mudd  v,  Bast  (1864), 
?4  Mo.  465. 


362 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS    [§§  424,  425 

equal  duty  to  apply  them  to  the  discharge  of  partnership  obliga- 
tions.78 

Where  there  are  more  than  two  partners,  the  majority  have 
the  same  power  to  control  the  winding  up  of  the  business  that 
they  have  to  direct  its  conduct  before  dissolution.79 

§424.  "Within  this  narrow  field  of  closing  up  the  busi- 
ness there  is  here,  unlike  the  case  of  the  surviving  partner,80  a 
real  agency  and  not  merely  a  right  to  incur  expenses,  binding 
himself  only  in  the  first  instance,  but  with  a  right  to  contribu- 
tion ;  the  authorized  acts  of  the  partner  impose  direct  contractual 
obligations  upon  his  partners  as  they  would  have  done  before 
dissolution. 

Under  the  Uniform  Partnership  Act  after  dissolution  each 
partner  (with  certain  exceptions  named81)  "can  bind  the  part- 
nership *  *  *  by  any  act  appropriate  for  winding  up 
partnership  affairs  or  completing  transactions  unfinished  at 
dissolution. ' ' 82 

The  mere  fact  that  a  partner  is  insolvent  does  not,  it  is  held, 
per  se  disqualify  him  from  acting ; 83  but  under  the  Uniform 
Partnership  Act  his  bankruptcy  would  disqualify  him.84 

§425. No  authority  to  create  new  obligations.  —  But 

except  for  the  closing  up  or  completion  of  old  transactions  the 
authority  of  each  partner  after  dissolution  is  ended.  He  can- 
not create  new  obligations,  or  vary  the  character,  form  or  obli- 
gation of  those  already  existing.85  Hence  he  cannot,  after 

78 Gray  v.  Green    (1894),  142  N.  had  no  notice  or  knowledge  of  his 

Y.  316,  37  N.  E.  124,  40  Am.  St.  E.  lack  of  authority.     Sec.  35  (3). 

596.  82  Sec.  35  (1)   (a). 

79  Western   Stage  Co.   v.   Walker,  83  See  Ileartt  v.  Walsh,  supra, 
supra.  84  Sec.  35  (3)  (6). 

80  Ante,  §  402.  85  Thus,  for  example,  if  negotia- 

81  Not,  where  the  business  has  be-  tions  pending  had  not  ripened  into  a 
come  unlawful,   by   any   act   except  contract  at  the  time  of  notice  of  the 
one  appropriate  for  winding  up  the  dissolution,    there    is    no    authority 
affairs;   not  where  the  partner  who  ordinarily  to  complete  it  afterward, 
assumes  to  act  has  become  a  bank-  See  Goodspeed  v.  Plow  Co.   (1881), 
rupt;  not,  where  the  agreements  ex-  45   Mich.   322,   7  N.  W.   902,   Gilm. 
elude   him,   except   in    certain    cases  Cas.  404. 

wherein  the  person  dealing  with  him 

363 


§425] 


LAW  OF  PARTNERSHIP 


dissolution,  bind  liis  partners  by  making,  accepting,  indorsing 
or  renewing  negotiable  paper ; 86  create  a  new  or  revive  an  old 
debt  against  them ;  remove  the  bar  of  the  statute  of  limitations 
as  to  them ; 87  or  bind  them  by  admissions  or  declarations  not 
relating  to  the  settlement  of  prior  transactions ; 88  provided,  of 
course,  in  all  cases,  that  due  notice  of  the  dissolution  had  been 


given.89 

86  See     Humphries     v.     Chastain 
(1848),  5  Ga.  166,  48  Am.  Dec.  247, 
Meehem's  Gas.  532,  Gilm.  Gas.  408; 
White  v.  Tudor  (1860),  24  Tex.  639, 
76  Am.  Dec.  126;  Palmer  v.  Dodge 
(1854),  4  Ohio  St.  21,  62  Am.  Dec. 
271,    Gilm.    Cas.    405;    Campbell   v. 
Herrick  (1919),  104  Kan.  657,  180 
Pac.  237 ;  Bank  of  Montreal  v.  Page 
(1881),  98  111.  109;  Kobb  v.  Mudge 
(I860),   80   Mass.    (14   Gray)    534; 
Woodson  v.   Wood    (1888),   84  Va. 
478,  5  S.  E.  277;  Clement  v.  Clem- 
ent (1887),  69  Wis.  599,  35  N.  W. 
17,  2  Am.  St.  R.  760.    Fact  that  it 
was  for  an  antecedent  debt  does  not 
change  the  rule,  except  when  made 
in  pursuance  of  binding  agreement 
made  before  dissolution:  Richardson 
v.  Moies  (1862),  31  Mo.  430,  Burd. 
Cas.  366.     Might  indorse  "without 
recourse ' '    when   necessary   to   pass 
title     for     a    partnership     purpose. 
Waite  v.  Foster  (1851),  33  Me.  424; 
Yale    v.    Eames     (1840),    1    Mete. 
(Mass.)  486. 

87  Van      Keuren      v.      Parmelee 
(1849),  2  N.  Y.  523,  51  Am.  Dec. 
322,    Meehem's    Cas.    533;    Tate   v. 
Clements    (1878),    16   Fla.    339,    26 
Am.    Rep.    709;    Mayberry    v.    Wil- 
loughby  (1877),  5  Neb.  368,  25  Am. 
Rep.   491,  Gilm.   Cas.   413;    Kallen- 
bach   v.  Dickinson    (1881),  100  111. 
427,  39  Am.  Rep.  47 ;  Miller  v.  Meim- 
erick  (1857),  19  111.  172,  Gilm.  Cas. 
412. 


There  are  cases  holding  other- 
wise as  to  the  power  of  one  part- 
ner to  prevent  the  operation  of  the 
statute  of  limitations  by  admis- 
sions or  payments,  following  Whit- 
comb  v.  Whiting  (1781),  2  Doug. 
652,  Meehem's  Cas.  1025,  and  Wood 
v.  Braddick  (1808),  1  Taunt.  104, 
Meehem's  Cas.  1026,  Ames'  Cas. 
607,  Burd.  Cas.  369,  Gilm.  Cas.  411, 
such  as  Beardsley  v.  Hall  (1869), 
36  Conn.  270,  4  Am.  Rep.  74;  Mer- 
ritt  v.  Day  (1875),  38  N.  J.  L.  32, 
20  Am.  Rep.  362,  (compare  Parker 
v.  Butterworth  (1884),  46  N.  J.  L. 
244)  but  the  weight  of  authority  is 
opposed  to  these  cases. 

The  question  is  now  frequently 
regulated  by  the  statute,  which  de- 
clares, e.  g.,  that  one  shall  not  lose 
the  benefit  of  the  statute  by  reason 
of  any  promise,  etc.,  made  by  an- 
other. 

88  See  Pennoyer  v.  David  (1860), 
8    Mich.    407,    Meehem's   Cas.   543; 
Feigley  v.  Whitaker  (1872),  22  Ohio 
St.  606,  10  Am.  Rep.  778,  Meehem's 
Cas.  550;  Maxey  v.  Strong  (1876), 
53  Miss.  280.     Compare  Hackley  v. 
Patrick    (1808),   3   Johns.    (N.   Y.) 
536;  Baker  v.  Stackpoole  (1827),  9 
Cow.  (N.  Y.)  420,  18  Am.  Dec.  508; 
Hart  v.  Woodruff    (1881),  24  Hun 
(N.  Y.)  510,  Burd.  Cas.  370,  admis- 
sion of  one  after  dissolution  does  not 
bind  others. 

89  In  Tate  v.  Clements,  supra,  it 


364 


EFFECT  OF  DISSOLUTION  ON  POWERS  OF  PARTNERS       [  §  426 

Subordinate  and  incidental  expenses,  necessary  to  the  main 
purpose  of  winding  up  the  business,  e.  g.,  clerical  help,  insur- 
ance of  goods,  storage,  and  the  like,  are  not  deemed  new  obliga- 
tions within  this  prohibition.90 

§  426.  Authority  of  settling  or  liquidating  partner. — Instead 
of  all  the  partners  participating  in  the  settlement  of  the  part- 
nership affairs  after  dissolution,  as  contemplated  in  the  last 
section,  the  partners  may,  upon  such  dissolution,  agree  that  one 
of  the  partners  only  shall  proceed  to  liquidate  the  affairs  of  the 
firm.  An  express  agreement  to  this  effect  is  not  indispensable; 
it  may  be  shown  by  acquiescence.91  The  effect  of  such  an  agree- 
ment is  not  to  enlarge  the  authority  of  the  settling  partner,  but 
to  exclude  the  others  from  participation.  Such  an  agreement 
could  not,  of  course,  affect  third  persons  who  had  no  notice  of 
it,  but  if  they  have  notice  of  special  arrangements  they  will  be 
subject  to  the  equities  of  the  partners  if  they  do  not  deal  only 
with  the  partner  so  specified.92 

The  liquidating  partner  is  bound  to  be  diligent  and  must  not 
unreasonably  prolong  the  settlement.  If  he  does,  equity  may 
interfere.  His  duty  of  good  faith  and  fair  dealing  is  perhaps 
intensified  by  his  position  as  sole  administrator. 

He  has,  like  any  other  partner  after  dissolution,  authority  to 
wind  up  and  complete  partnership  transactions  only,  and  not 

is,  indeed,   said  that  notice  is  not  Act,  the  partnership  is  not  bound  by 

necessary,  as  the  requirement  of  no-  any  act  of  a  partner  who  has  no  au- 

tice    has    reference    to    future    deal-  thority  to  wind  up  partnership  af- 

ings  only;  but  see  Clement  v.  Clem-  fairs,  except  by  a  transaction  with 

ent,  supra;  Sage  v.  Ensign  (1861),  one  who  had  extended  credit  to  the 

2     Allen     (Mass.)     245.       Compare  partnership  prior  to  dissolution  and 

Green  v.  Baird  (1893),  53  111.  App.  had  no  knowledge  or  notice  of  his 

211.  p.ant  of  authority,  or  with  one  who 

90  See  Conrad  v.  Buck  (1883),  21  had  not  extended  credit  prior  to  dis- 
W.    Va.    396;    Stebbins   v.    Willard  solution  if  he  had  no  knowledge  or 
(1881),  53  Vt.  665.  notice   of   his   want   of  authority — 

91  See  Wilson  v.   Waugh    (1882),  and  if  the  fact  of  such  want  of  au- 
101  Pa.  233,  Mechem's  Gas.  546.  thority  had  not  been  advertised  as 

92  See   Gillilan   v.    Sun   Mut.   Ins.  required    for    dissolution.     Sec.    35 
Co.  (1869),  41  N.  Y.  376.  (3)    (c). 

Under    the   TTniform    Partnership 

365 


426] 


LAW   OF   PARTNERSHIP 


to  create  new  debts  or  obligations  against  his  former  partners  ;  93 
but  for  the  purposes  of  winding  up,  collecting  debts,  discharging 
obligations,  and  reducing  the  assets  to  an  available  and  distrib- 
utable form,  all  the  powers  of  the  partners  are  concentrated  in 
him  and  may  be  exercised  accordingly.94 


93  See    White    v.    Tudor,    supra; 
Conrad  v.  Buck  (1883),  21  W.  Va. 
396;    Bank    of    Montreal    v.    Page, 
supra.  Not  authorized  to  give  notes: 
Potter  v.  Tolbert  (1897),  113  Mich. 
486,  71  N.  W.  849,  Burd.  Gas.  367. 

94  See  Palmer  v.  Dodge  (1854),  4 
Ohio  St.  21,  62  Am.  Dec.  271,  Gilm. 
Cas.    405  j     Hilton    v.    Vanderbilt 


(1880),  82  N.  Y.  591;  Gilmore  v. 
Ham  (1894),  142  N.  Y.  1,  36  N.  E. 
826,  40  Am.  St.  E.  554.  In  Pennsyl- 
vania,  see  Estate  of  Davis  (1840),  5 
Whart.  530,  34  Am.  Dec.  574;  Ful- 
ton  v.  Central  Bank  (1879),  92  Pa. 
112;  Earon  v.  Mackey  (1884),  106 
Pa.  452;  Wilson  v.  Waugh,  supra. 


366 


CHAPTER  XVIII. 

OF     SPECIAL     AGREEMENTS     BETWEEN     THE     PARTNERS     AT 

DISSOLUTION. 

§  427.  Agreements    as    to    distribu-       §  429.  Creditor 's  assent  to  ar- 

tion    of    property    or    pay-  rangement. 

ment  of  debts. 

428.  Creating       relation       of 

principal  and  surety. 

§427.  Agreements  as  to  distribution  of  property  or  pay- 
ment of  debts. — It  is  not  uncommon  for  the  partners  to  agree 
at  dissolution  as  to  the  distribution  of  the  partnership  property 
or  the  payment  of  the  partnership  debts.  Thus,  an  agreement 
that  the  continuing  partner  shall  assume  and  pay  the  partner- 
ship debts  is  often  made,  and,  even  though  not  expressly  made, 
would  often  be  implied.  Thus,  where  one  partner  sells  out  to 
his  co-partners  under  circumstances  indicating  that  they  are 
estimating  and  buying  his  interest  over  and  above  the  amount 
of  the  indebtedness,  there  is  held  to  be  an  implied  assumption 
of  the  debts  on  their  part,  where  nothing  appears  to  the  con- 
trary.1 But  where  one  partner  sells  out  to  a  stranger  who 
assumes  the  seller's  obligations  and  forms  a  new  partnership 
with  the  other  partners  to  continue  the  business,  an  agreement 
by  such  other  partners  to  assume  the  existing  debts  will,  it  is 
held,  be  implied  only  to  the  extent  of  the  firm  assets  received 
by  the  continuing  partners.2  It  is  not  an  agreement  to  answer 

ISee  Cobb  v.  Benedict  (1900),  27  2  See  Hobbs  v.  Wilson  (1865),  1 

Colo.  342,  62  Pac.  222,  Mechem's  W.  Va.  50;  Peyton  v.  Lewis  (1851), 

Gas.  557.  12  B.  Mon.  (Ky.)  356,  Mechem's 

As  to  the  effect  of  suc"h  a  sale  as  Gas.  1028.  See,  also,  LaMontagne 
an  accounting  and  adjustment  of  v.  Bank  (1905),  183  N.  Y.  173,  76 
partnership  and  individual  claims,  N.  E.  33;  Sheppard  v.  Bridges 
see  Lesure  v.  Norris  (1853),  65  (1911),  137  Ga.  615,  74  S.  E.  245. 
Mass.  (11  Gush.)  328;  Wiggin  v.  Where  certain  members  of  a  part- 
Goodwin  (1873),  63  Me.  389;  Pierce  nership  with  transferable  shares  (a 
v.  Ten  Eyck  (1890),  9  Mont.  349,  "joint  stock  company")  sold  and 
23  Pae.  423.  transferred  their  shares  to  persons 

367 


§  428]  LAW  OF  PARTNERSHIP 

for  the  debt  of  another,  and  is  therefore  valid  though  not  in 
writing.3 

Such  agreements  are  entirely  valid  as  between  the  partners 
themselves,  but  they  do  not  bind  the  firm  creditors  unless  the 
latter  become  a  party  to  them.  The  liability  of  each  partner 
for  the  payment  of  the  partnership  debts  continues  in  solido 
after  dissolution  as  before ;  and  creditors  cannot  be  cut  off  from 
their  remedies  by  any*  agreement  between  the  partners  alone. 
They  neither  lose  their  right  to  proceed  against  the  partner  in 
whose  favor  the  arrangement  is  made,  nor  are  they  required  to 
first  exhaust  their  remedies  against  the  other. 

The  Uniform  Partnership  Act  is  to  the  same  effect.4 

§  428.  • Creating  relation  of  principal  and  surety. — Such 

an  agreement,  however,  it  has  been  held,  in  England  and  several 
of  the  States,  creates  the  relation  of  principal  and  surety  be- 
tween the  partners — the  partner  assuming  the  debts  being  the 
principal  and  the  other  the  surety, — and  creditors  who  have 
notice  of  this  arrangement  have  been  held  bound  to  respect  the 
rights  of  the  surety  as  in  other  cases.5  Thus,  it  has  been  held 

•who  were   accepted   as  members   in  curred  while  he  was  a  partner  but 

their  place,  this  (while  not  releasing  subject  to  the  prior  payment  of  his 

the  transferors  from  their  liability  separate  debts." 
to  existing  creditors)  amounts  to  an          5  See  Oakley  v.  Pasheller   (1836), 

undertaking   by    the    association    to  4   Cl.  &  F.  207,   10   Bligh    (N.   S.) 

assume  and  indemnify  them  against  548;    Eouse    v.    Bradford    Banking 

such   liability,   and   therefore   mem-  Co.    [1894],    App.    Gas.    586;     Col- 

bers    of    the    association    who    have  grove  v.  Tallman   (1876),  67  N.  Y. 

later  paid  those  debts  cannot  recover  95,   23    Am.   Rep.    90;    Campbell   v. 

contribution  from  the  retired  mem-  Floyd   (1892),  153  Pa,  84,  25  Atl. 

bers:  Savage  v.  Putnam  (1865),  32  1033,     1038;     Preston    v.     Garrard 

N.  Y.  501.  (1904),  120  Ga.  689,  49  S.  E.  118, 

3  See   Hunt  v.   Eogers    (1863),   7  102  Am.  St.  R.  124,  Gilm.  Cas.  334. 
Allen  (Mass.),  469;  Vanness  v.  Du-  See    Smith    v.    Sheldon    (1876),    35 
bois  (1878),  64  Ind.  338.  Mich.    42,    24    Am.    Rep.    529,    Me- 

4  See  sec.  36:   "(1)    The  dissolu-  chem's    Cas.    583,    Gilm.    Cas.    332; 
tion  of  the  partnership  does  not  of  Brill  v.  Hoile  (1881),  53  Wis.  537, 
itself  discharge  the  existing  liability  11    N.   W.    42;    Leithauser   v.    Bau- 
of       any       partner.'    *     *     *     (4)  meister    (1891),   47    Minn.    151,   49 
The    individual    property   of    a    dc-  N.  W.  660,  28  Am.  St.  R.  336;  Por- 
ceased  partner  shall  be  liable  for  all  ter  v.  Baxter  (1898),  71  Minn.  195, 
obligations   of    thei    partnership    in-  73  N.  W.  844.     See,  also,  Tillis  v. 

368 


SPECIAL    AGREEMENTS   BETWEEN   PARTNERS 


[§428 


that  a  binding  and  definite  extension  of  time  6  to  the  partner 
who  has  thus  become  the  principal  debtor,  or  a  substantial  change 
of  terms,7  or  a  neglect  or  refusal  on  request  to  collect  of  the 
principal  debtor  while  he  was  solvent,8  or  a  release  of  securities  9 
•will  release  the  other ;  and  if  the  latter  pays  the  debt  he  is  en- 
titled to  the  benefit  of  the  securities  which  the  creditor  held 
against  the  principal  debtor.10 

On  the  other  hand  there  is  a  considerable  number  of  cases 
which  emphatically  deny  that  it  is  within  the  power  of  the  part- 
ners by  any  arrangement  between  themselves  alone  to  alter  the 
relation  in  which  they  stood  when  the  obligation  was  incurred 
or  to  impose  upon  the  creditor  any  limitations  or  obligations 
which  were  not  an  incident  to  the  original  relation.11 

The  Uniform  Partnership  Act  adopts  substantially  the  view 
first  stated.12 


Folmar  (1906),  145  Ala.  176,  39  So. 
913,  117  Am.  St.  R.  31;  Fernald  v. 
Clark  (1892),  84  Me.  234,  24  Atl. 
823. 

6  Smith   v.    Sheldon,   supra;   Brill 
v.  Hoile,  supra;  Leithauser  v.  Bau- 
meister,  supra;   Campbell  v.  Floyd, 
supra;    Preston   v.    Garrard,    supra. 
Mere    forbearance    is    not    enough: 
Powers  v.  Silberstein  (1888),  108  N. 
Y.  169,  15  N.  E.  185. 

7  See  Porter  v.  Baxter,  supra. 

S  Where  the  right  to  make  such 
a  demand  is  recognized  as  part  of 
the  law  of  principal  and  surety. 
Colgrove  v.  Tallman,  supra. 

»  See  Bell  v.  Hall  (1846),  5  N.  J. 
Eq.  477.  Compare  First  Nat.  Bank 
v.  Cheney  (1896),  114  Ala.  536,  21 
So.  1002;  Johnson  v.  Jones  (1913), 
39'Okla.  323,  135  Pac.  12,  48  L.  E. 
A.  (N.  S.)  547. 

10  See  Johnson  v.  Young    (1882), 
20  W.  Va.  614.     Compare  Sands  v. 
Durham    (1901),  99  Va.  263,  38   S. 
E.  145,  54  L.  E.  A.  614,  86  Am.  St. 
E.  884. 

11  See  Barnes   v.   Boyers    (1890), 

Mech.  Part.— 24  369 


34  W.  Va.  303,  12  S.  E.  708,  Me- 
chem's  Cas.  589;  McCoy  v.  Jack 
(1899),  47  W.  Va.  201,  34  S.  E. 
991;  National  Cash  Eegister  Co.  v. 
Brown  (1897),  19  Mont.  200,  47 
Pae.  995,  37  L.  E.  A.  515,  61  Am. 
St.  Eep.  498;  Grotte  v.  Weil  (1901), 
62  Neb.  478,  87  N.  W.  173,  Me- 
chem's  Cas.  592;  Dean  v.  Collins 
(1906),  15  N.  Dak.  535,  108  N.  W. 
242,  9  L.  E,  A.  (N.  S.)  49,  125 
Am.  St.  E,  610,  11  Ann.  Cas.  1027; 
McAreavy  v.  Magirl  (1904),  123 
Iowa  605,  99  N.  W.  193,  Gilm.  Cas. 
330;  Clinchfield  Fuel  Co.  v.  Lundy 
(1914),  130  Tenn.  135,  169  S.  W. 
563,  L.  E.  A.  1915  B  418;  Shapleigh 
Hardware  Co.  v.  Wells  (1896),  90 
Tex.  110,  37  S.  W.  411,  59  Am.  St. 
E.  783;  Eawson  v.  Taylor  (1876), 
30  Ohio  St.  389,  27  Am.  Eep.  464. 

12  Sec.  36  (3):  "Where  a  person 
agrees  to  assume  the  existing  obliga- 
tions of  a  dissolved  partnership,  the 
partners  whose  obligations  have  been 
assumed  shall  be  discharged  from 
any  liability  to  any  creditor  of  the 
partnership  who,  knowing  of  the 


§429] 


LAW  OP  PARTNERSHIP 


§429.  Creditor's  assent  to  arrangement.  —  An  assent, 

however,  by  the  creditor  to  the  assumption  by  one  partner  of 
the  firm's  debt  to  such  creditor,  and  an  agreement  by  the  cred- 
itor to  look  to  such  partner  alone  for  payment,  if  upon  a  suffi- 
cient consideration,  will  amount  to  a  novation  and  discharge  the 
retiring  partner.  Such  assent  must  be  actual,  though  it  need 
not  be  express  or  formal.  It  may  be  inferred  from  words  or 
conduct  reasonably  justifying  the  conclusion  that  he  had  released 
the  retiring  partner  and  accepted  the  continuing  one  in  his 
stead.13  It  will  not  ordinarily  be  inferred  from  mere  silence.14 
And  unless  there  is  a  sufficient  consideration,  the  agreement  of 
the  creditor  to  release  the  retiring  partner  and  look  only  to  the 
others  will  not  be  binding,15  but  the  acquisition  of  the  separate 
indebtedness  of  one  partner  would  ordinarily  furnish  a  suffi- 
cient consideration  for  the  discharge  of  the  joint  obligation  of 
all.16  Not  so,  however,  where  the  partnership  obligation  was 
already  several  as  well  as  joint.17 

agreement,    consents   to    a   material      and  such  agreement  may  be  inferred 

from  the  course  of  dealing  between 
the  creditor"  having  knowledge  of  the 
dissolution  and  the  person  or  part- 
nership continuing  the  business." 

14  Eagle    Mfg.    Co.    v.    Jennings 
(1883),  29  Kan.  657,  44  Am.  Rep. 

668,  Mechem's  Cas.  1035. 
l&Collyer   v.    Moulton    (1868),    9 

R.  I.  90,  98  Am.  Dec.  370;  Eagle 
Mfg.  Co.  v.  Jennings,  supra. 

16  See      Thompson      v.     Percival, 
supra;  Lyth  v.  Ault  (1852),  7  Exch. 

669,  Burd.  Cas.  385,  Gilm.  Cas.  336; 
Ludington  v.  Bell  (1879),  77  N.  Y. 
138,    33   Am.   Rep.    601;    Motley  v. 
Wickoff   (1897),  113  Mich.  231,  71 
N.   W.   520,  Burd.   Cas.   293,   Gilm. 
Cas.  337;  Grubbe  v.  Pierce  (1914), 
156  Wis.  29,  145  N.  W.  207,  37  Ann. 
Cas.  1199,  51  L.  R.  A.  (N.  S.)  358. 

17  As  by  statute  in  several  states. 
See    Eagle    Mfg.    Co.    v.    Jennings, 
supra;   Early    v.    Burt    (1886),    68 
Iowa  716,  28  N.  W.  35. 


alteration  in  the  nature  or  time  of 
payment  of  such  obligations." 

13  See  First  National  Bank  v.' 
Green  (1884),  40  Ohio  St.  431,  Me- 
chem's Cas.  1031;  York  v.  Orton 
(1885),  65  Wis.  6,  26  N.  W.  166; 
Thompson  v.  Percival  (1834),  5  B. 
&  Ad.  925;  Hart  v.  Alexander 
(1837),  2  M.  &  W.  484;  First  Nat. 
Bank  v.  State  Savings  Bank  (1902), 
130  Mich.  332,  89  N.  W.  941;  John- 
son v.  Jones,  supra;  Hall  v.  Jones 
(1876),  56  Ala.  493,  Gilm.  Cas.  339; 
Kirwan  v.  Kirwan  (1834),  2  C.  & 
M.  617,  Burd.  Cas.  384;  Walstrom 
v.  Hopkins  (1883),  103  Pa.  118. 

The  Uniform  Partnership  Act  is 
to  the  same  effect.  Sec.  36:  "(2) 
A  partner  is  discharged  from  any 
existing  liability  upon  dissolution  of 
the  partnership  by  an  agreement  to 
that  effect  between  himself,  the  part- 
nership creditor,  and  the  person  or 
partnership  continuing  the  business; 


370 


CHAPTER  XIX. 

OF  THE  SO-CALLED  LIEN  OF  PAETNEES. 

§  430.  In  general.  §  434.  Against   whom   lien  exists. 

431.  Nature  of  the  right.  435.  What  the  lien  secures. 

432.  When  it  becomes  impor-          436.  How  lien  is  lost. 

tant.  437.  No  lien  if  partnership  illegal. 

433.  To  what  the  lien  attaches. 

§  430.  In  general. — Something  has  been  already  said  regard- 
ing the  right  of  each  partner  to  insist  that  the  partnership  assets 
shall  be  applied  to  the  payment  of  the  partnership  debts;  and 
it  has  been  noticed  that  the  right  is  often  spoken  of  as  the  part- 
ner's  lien.1  Before  taking  up  the  subject  of  the  application  of 
the  assets  and  the  final  accounting,  a  little  further  consideration 
of  this  subject  seems  desirable.  In  dealing  with  this  matter,  the 
language  of  Mr.  Justice  Lindley  will  be  largely  adopted.2 

§431.  Nature  of  the  right. — In  order  to  discharge  himself 
from  his  liabilities  as  a  partner,  every  partner  has  a  right  to  have 
the  property  of  the  partnership  applied  in  payment  of  the 
partnership  debts.  In  order,  also,  to  secure  a  proper  division 
of  the  surplus  assets,  he  has  a  right  to  have  whatever  may  be 
due  to  the  firm  from  his  copartners,  as  members  thereof,  deducted 
from  what  otherwise  would  be  payable  to  them  in  respect  of 
their  shares  in  the  partnership.  In  other  words,  each  partner 
may  be  said  to  have  a  sort  of  equitable  lien  on  the  partnership 
property  for  the  purpose  of  having  it  applied  in  payment  of 
the  partnership  debts;  and  also  a  similar  lien  upon  the  surplus 
assets  for  the  purpose  of  having  them  applied  in  payment  of 
what  may  be  due  to  the  partners  respectively,  after  deducting 
what  may  be  due  from  them  as  partners,  to  the  firm.8 

1  See  ante,  §184.  3  See    1   Lindley,   supra;   Pearson 

2  See    1    Lindley    on    Partnership       v.  Keedy   (1845),  6  B.  Mon.    (Ky.) 
(Ewell's  2d  ed.),  352  et  seq.  128,  43  Am.  Dec.  160;  BardweU  v. 

371 


§§432,433]  LAW  OF  PARTNERSHIP 

§432.  Same  subject  —  When  it  becomes  important.  —  This 
"right,  lien,  quasi  lien,  or  whatever  else  it  may  be  called,"  to 
use  Mr.  Justice  Lindley's  expression,  does  not  exist  for  any 
practical  purpose  until  the  affairs  of  the  partnership  have  to 
be  wound  up,  or  the  share  of  a  partner  has  to  be  ascertained ; 
nor  has  any  partner  thereby,  as  has  been  seen,4  a  right  to  insist 
that  firm  creditors  shall  exhaust  the  firm  assets  before  having 
recourse  to  the  partners  as  individuals.  But  when  partnership 
accounts  have  to  be  taken,  or  the  shares  of  the  partners-  have  to 
be  ascertained,  the  lien  of  the  partners  on  the  firm  assets  and  on 
each  other's  shares  becomes  of  the  greatest  importance.  If,  for 
example,  a  partner  attempts  to  transfer,  or  his  separate  creditors 
attempt  to  seize,  his  interest  in  the  partnership  property,  the 
right  of  the  other  partners  to  insist  that  nothing  shall  be  with- 
drawn for  this  purpose  until  after  the  partnership  claims  are 
satisfied,  is  obviously  of  consequence.  In  many  cases  it  is  said 
that  the  rights  of  partnership  creditors  are  to  be  worked  out 
through  the  liens  of  the  partners.5  Nevertheless,  a  proper  con- 
ception of  the  partnership  tenure  and  of  the  nature  of  each 
partner's  interest  in  the  partnership  property,  renders  the  de- 
velopment of  the  partner's  lien  superfluous. 

The  Uniform  Partnership  Act  quite  fully  recognizes  this 
view.6 

§433.  To  what  the  lien  attaches. — During  the  continuance 
of  the  partnership,  the  lien  attaches  to  everything  which  can  be 
considered  partnership  property.  It  is  not  lost  by  substitution 
of  new  stock  for  old,  and  on  the  death  or  bankruptcy  of  a  part- 
ner his  lien  continues  in  favor  of  those  who  represent  him  until 
his  share  has  been  ascertained  and  provided  for  by  the  other 
partners.  After  the  partnership  has  been  dissolved,  however, 
the  lien  is  confined  to  what  was  partnership  property  at  the  time 
of  the  dissolution,  and  does  not  extend  to  what  may  have  been 
subsequently  acquired  by  those  who  continue  to  carry  on  the 
business. 

Perry   (1847),  19  Vt.  292,  47  Am.  (1878),  99  U.  S.  119,  25  L.  ed.  370, 

Dec.  687.  Mechem's  Gas.  596,  Ames'  Cas.  246, 

4  See  ante,  §  314.  Gilm.  Cas.  226. 

6  See    e.   g.,   Case   v.   Beauregard          6  Sec.  25. 

372 


LIEN  OP  PARTNERS  [§§  434,  435 

As  the  lien  extends  only  to  that  which  is  firm  property,  if  the 
partnership  be  one  in  the  profits  only,  the  lien  can  attach  to  the 
profits  alone  and  not  to  the  means  by  which  those  profits  were 
produced.7  And  as  it  is  an  incident  of  partnership,  it  does  not 
exist  where  there  is  really  no  partnership  but  only  a  joint  ad- 
venture, in  respect  of  which  each  retains  the  title  to  his  own 
goods  and  their  proceeds.8 

§  434.  Against  whom  lien  exists. — The  lien  of  each  partner 
exists  not  only  as  against  the  other  partners,  but  also  against  all 
persons  claiming  through  them  or  any  of  them.9  It  is  available, 
therefore,  against  their  executors,  execution  creditors  and  as- 
signees or  trustees  in  bankruptcy.10  While,  however,  it  exists 
against  the  share  of  each  partner  and  against  a  person  who 
purchases  that  share  from  him,  it  would  defeat  the  purposes  of 
the  partnership  to  enforce  it  against  the  purchaser  of  firm  prop- 
erty in  the  ordinary  course  of  business ;  and  a  person,  therefore, 
who  in  good  faith  and  for  value  purchases  from  one  partner  in 
the  course  of  the  business  specific  chattels  belonging  to  the  firm, 
acquires  a  good  title  thereto  notwithstanding  the  liens  which  the 
other  partners  might  have  had  prior  to  the  sale.11 

§435.  What  the  lien  secures. — The  lien  of  the  partners  is 
intended  to  secure  whatever  is  due  to  or  from  the  firm  by  or  to 
the  members  thereof  as  such.12  It  does  not  extend  to  debts  in- 
curred between  the  firm  and  its  members  otherwise  than  in  their 
capacity  as  partners,  and  in  case  of  the  bankruptcy  of  a  partner 
his  assignees  may  claim  his  share  without  regard  to  such  a  debt ; 

7  See  ante,  §  82.  creditors  who  seek  to  reach  his  in- 

81  Lindley,  353  (Swell's  2d.  ed.).  terest:   Divine  v.   Mitchum    (1844), 

91  Lindley,  354  (Ewell's  2d  ed.).  4  B.  Mon.  (Ky.)  488,  41  Am.  Dec. 

10  See      Kirby     v.      Schoonmaker  241,  Meehem  's  Cas.  626.     Or  reim- 
(1848),  3  Barb.  Ch.  (N.  Y.)  46,  49  bursement  for  firm  credit  extended 
Am.  Dec.  160.  to  one  partner  as  against  a  mort- 

11  See  1  Lindley,  ubi  supra.  gagee    of    his    interest,    Warren    v. 

12  For  example,  it  secures  the  re-  Taylor    (1877),    60    Ala.    218,    Me- 
payment  of  one  partner's  advances  ehem's   Cas.    1081,  Burd.   Cas.   580, 
to    the   firm,   as   against   the    other  Gilm.  Cas.  446. 

partner's    transferees    or    attaching 

373 


§§436,437]  LAW  OF  PARTNERSHIP 

as,  for  example,  a  debt  for  money  borrowed  by  one  partner  from 
another  for  a  purely  private  purpose  of  his  own.13" 

§436.  How  lien  is  lost. — The  partner's  lien  on  partnership 
property  is  lost  by  the  conversion  of  such  property  into  the 
separate  property  of  another  partner,  or  into  the  property  of  a 
stranger  with  the  other  partner's  consent.  If,  therefore,  on 
dissolution  the  property  of  the  firm  is  divided  between  the  part- 
ners upon  the  understanding  that  the  debts  shall  be  paid  in  some 
specified  way,  the  lien,  so  far  as  the  partners  themselves  are 
concerned,  is  gone  and  the  partners  cannot  reclaim  the  property, 
although  the  debts  remain  unpaid.14  So  where  one  partner  sells 
out  all  of  his  interest  in  the  firm  to  his  copartner,  and  the  latter 
agrees  to  pay  the  debts  of  the  partnership,  the  lien  of  the  selling 
partner  is,  in  many  cases,  held  to  be  gone,  and,  as  an  incident, 
as  will  be  seen,15  the  rights  of  the  firm  creditors  to  priority  of 
payment  out  of  the  assets,  which  is  a  right  worked  out  through 
the  right  of  the  partner,16  is  held  to  be  gone  also.17  This  sub- 
ject, however,  will  be  more  fully  considered  in  the  following 
chapter. 

§  437.  No  lien  if  partnership  illegal. — If  the  partnership  is 

illegal,  its  members  have  no  lien  upon  their  common  property  or 
upon  each  other 's  shares  therein,  unless  it  be'  by  virtue  of  some 
agreement  not  affected  by  the  illegality.18 

IS  See  1  Lindley  354   (Swell's  2d  565;  Parker  v.  Merritt  (1883),  105 

ed.).    Surviving  partner  has  no  lien  111.  293;  Vosper  v.  Kramer  (1879), 

on  share  of  deceased  partner  for  a  31  N.  J.  Eq.  420;  Ex  parte  Euffin 

private  debt:   Moffatt  v.  Thompson  (1801),  6  Vesey  119,  Meehem's  Gas. 

(1852),  5  Eich.   (S.  Car.)  Eq.  155,  1038,   Ames'   Cas.   192,   Burd.    Gas. 

57  Am.  Dee.  737.    Lien  secures  part-  192,  Gilm.  Cas.  217. 

nership  matters,  but  not  the  general  15  See  post,  §  446. 

balance  of  a  mixed  account.    Niehol  16  See  ante,  §  186. 

v.  Stewart  (1880),  36  Ark.  612.  17 See    Miller    v.     Estill,    supra; 

14  See  1  Lindley,  355  (Ewell's  2d  Ladd   v.   Griswold    (1847),  4   Gilm. 

ed.) ;  Miller  v.  Estill  (1856),  5  Ohio  (111.)  25,  46  Am.  Dec.  443;  Bedding- 

St.  508,  67  Am.  Dec.  305;  Smith  v.  ton  v.  Franey  (1905),  124  Wis.  590, 

Edwards  (1846),  7  Humph.  (Tenn.)  102    N.    W.    1065.      But    see    more 

106,  46  Am.  Dec.  71,  Mechem's  Cas.  fully,  post,  §446  et  seq. 

563;  Croone  v.  Bivens  (1859),  39  18  1  Lindley  355  (Ewell's  2d  ed.). 
Tenn.  (2  Head)  339,  Mechem's  Cas. 

374 


CHAPTER  XX. 


OF    THE  APPLICATION   OF   THE   PARTNERSHIP  AND  INDIVID- 
UAL ASSETS  TO  THE  CLAIMS  OF  CREDITOES. 


438.  In  general. 

439.  What  principles  control. 

440.  I.  Application    of    the    assets 

of    a    partnership    by    the 
partnership  creditors. 

441.  II.  Application  of  the  assets 

of    a    partnership    by    the 
partners  themselves. 

—  Right   to  pay  joint  but 
not   partnership    debts   out 
of  partnership  assets. 

—  Right  to  pay  individual 


442. 


443.  — 

debts  of  all  the  partners. 

444.  Right  to  assume  or  pay 

individual  debt  of  one  part- 
ner. 

445.  Right  of  partner  to  ap- 
ply    individual     assets     to 
firm  debts. 

446-448.  Right  of  partners  to 

convert  firm  property  into 
individual  property. 

449.  III.  Application      of      assets 

•when  distributed  by  court 
— Firm  creditors  first  paid 
out  of  firm  assets. 

450.  Joint    but    not   partner- 
ship    creditors     not     pre- 
ferred. 

451.  Partner  cannot   compete 

with  firm  creditors. 

452.  One       partner's       share 


§453. 


454. 
455. 


456. 
457. 

458. 
459, 


cannot  be  reached  by  his 
creditors  until  partners ' 
claims  against  firm  are  sat- 
isfied. 

—  Individual    creditors 
usually    given    priority    in 
individual  assets  of  a  part- 
ner. 

—  Contrary  views. 

—  How  where  there  are  in- 
dividual   but    no    partner- 
ship assets. 

—  Firm      cannot      compete 
with  individual  creditors. 

Partner   competing  with 

partnership  creditors  in  in- 
dividual assets. 

—  Obtaining  claims  against 


461. 

462. 
463. 


both  estates  by  contract. 

460.  Application  of  assets 
when  there  was  no  osten- 
sible partnership  —  When 
there  was  merely  an  osten- 
sible but  not  an  actual 
partnership. 

Application  of  assets  of  firms 
having  one  or  more  part- 
ners in  common. 

Application  of  assets  where 
there  are  successive  firms. 

Equitable  rules  do  not  defeat 
legal  priorities. 


§  438.  In  general. — The  question  of  the  proper  application 
and  distribution  of  the  partnership  assets  has  given  rise  to  no 
little  difficulty  and  conflict  of  decision.  The  chief  sources  of 

375 


§  439]  LAW  OF  PARTNERSHIP 

difficulty  have  been  disputes  between  the  creditors  of  the  part- 
nership and  the  creditors  of  the  individual  partners.  May  the 
creditors  of  the  individual  partners  obtain,  in  any  way,  the 
application  of  partnership  funds  to  their  claims  ?  May  partner- 
ship creditors,  whose  claims  are  not  satisfied  out  of  the  part- 
nership property,  have  recourse  to  the  individual  property  of 
the  partner,  and  in  such  case  may  they  share  equally  with  indi- 
vidual creditors  or  must  they  be  postponed  until  individual 
creditors  are  paid?  These  and  similar  questions  indicate  the 
difficulties  which  arise. 

§  439.  What  principles  control. — At  the  foundation  of  the 
matter  lies  the  rule,  already  noticed,1  which  must  constantly  be 
kept  in  mind.  The  capital  or  property  of  the  firm  has  been 
contributed  for  partnership  purposes,  and  it  is  part  of  the  im- 
plied, if  not  the  express,  understanding  between  the  partners, 
that  the  partnership  property  shall  primarily  be  used  only  for 
partnership  purposes,  e.  g.,  to  pay  partnership  debts.  Each 
partner  has  therefore  the  right  to  insist  that  the  partnership 
property  shall  be  so  applied.  This  right  is  primarily  the  right 
of  the  partners  as  between  themselves ;  but  it  has  sometimes  been 
regarded,  not  as  the  right  of  the  partners  alone,  but,  in  some 
way,  as  the  right  of  the  partnership  creditors,  and  many  cases 
have  been  decided  upon  this  assumption.  If  it  is  a  right  of  the 
partners  only,  it  is  one  which  they  may  waive  if  they  see  fit  to 
do  so ;  but  if  it  is  a  right  of  the  creditors,  then  it  is  not  one  which 
the  partners  may  waive. 

The  question  may  present  a  different  aspect  if  it  arises  I,  while 
the  partnership  is  still  going  on  or  is  being  wound  up  by  the 
partners  themselves,  than  it  will  if  it  arises  II,  after  the  part- 
nership has  been  dissolved  and  the  affairs  are  being  wound  up 
under  judicial  direction;  and  we  will  therefore  separately  con- 
sider each  phase. 

Before  doing  so,  however,  it  may  be  well  to  recall  to  mind 
what  the  partnership  creditors  may  themselves  legally  do  to 
secure  the  application  of  the  partnership  assets  to  the  payment 
of  their  claims. 

1  See  ante,  §§  184-186. 

376 


APPLICATION  OF  PARTNERSHIP  ASSETS  [§    440 

§  440.  I.  Application  of  the  assets  of  a  partnership  by  the 
partnership  creditors. — Partnership  creditors,  as  has  been  seen, 
have  no  direct  lien  upon  the  partnership  assets,  unless  they 
acquire  one  specially  by  a  mortgage,  levy,  or  other  similar 
act.  In  this  respect  they  stand  in  the  same  situation  as  the 
creditors  of  an  individual.  They  may  be  able  to  induce  the 
partners  to  give  them  a  direct  lien;  if  not,  they  can  only 
avail  themselves  of  such  legal  remedies,  as  the  law  may  give 
them  for  the  enforcement  of  their  claims.  Equity  has  no 
original  jurisdiction  to  enforce  them.8  These  legal  remedies 
are  of  two  general  sorts:  I.  In  pursuance  of  some  statute, 
creditors  may  be  able  to  force  the  debtors  into  bankruptcy  or 
insolvency  proceedings,  in  the  course  of  which  they  may  secure 
the  application  of  the  partnership  assets  to  their  claims.  The 
national  bankruptcy  act,  for  example,  provides  for  declaring 
a  partnership  bankrupt  and  administering  its  assets  for  the 
benefit  of  creditors.8  In  some  States  insolvency  proceedings 
may  be  instituted.  II.  In  other  cases,  the  ordinary  process  by 
suit,  judgment  and  execution, — supplemented,  where  the  stat- 
ute provides  for  it,  by  proceedings  in  attachment, — may  be 
resorted  to  by  creditors.  "While,  as  has  been  seen,*  partners 
are  usually  joint  debtors,  an  execution  for  a  partnership  debt 
may  usually  be  levied,  as  has  also  been  seen,1  upon  either  part- 
nership or  individual  property.  Individual  creditors  may  re- 
sort to  the  individual  property,  or  to  the  partner's  residuary 
interest6  in  the  partnership  property.  While  a  prior  levy  by  a 
partnership  creditor  upon  individual  property  will  usually  take 
precedence  over  a  subsequent  levy  by  an  individual  creditor, 
a  prior  levy  by  an  individual  creditor  upon  a  partner's  inter- 
est in  the  partnership  property  operates  in  subordination  to 
the  demands  of  partnership  creditors  upon  that  property.7 

Legal  liens  so  acquired,  as  will  be  seen,8  are  not  usually  dis- 
turbed by  later  judicial  proceedings,  unless  they  amount  to  a 
preference  forbidden  by  some  statute. 

•  8e«     OEM     T.      Beauregard          4  See  ante,  f  308. 
(1878),  M  U.  S.  119,  25  L.  ed.          *  See  ante,  f  314. 

S70,    Mcchem'i   Gas.   596,   Ames'          « See  ante,  S  146  ft  teq. 
CM.  246,  Glim.  Cat.  22«.  1  See  ante,  if   146-148. 

•  Bee.  5.    Appendix.  *  See  post,  f  463. 

377 


§§441,442]  LAW  OF  PARTNERSHIP 

§  441.  II.  Application  of  the  assets  of  a  partnership  by  the 
partners  themselves. — While  the  affairs  of  the  partnership  are 
still  going  on  and  its  property  and  business  are  still  in  the  hands 
of  the  partners  themselves,  it  is,  in  general,  true  that  they  may 
make  such  disposition  of  the  property  as  they  see  fit.  It  has 
sometimes  been  said  that  the  partnership  creditors  have  a  kind 
of  lien  upon  the  partnership  assets,  but  this  is  not  true.  It  is 
the  property  of  the  partners,  which  they  may,  in  general,  deal 
with  as  they  please,  provided  they  make  no  disposition  of  it 
which  will  be  deemed  to  be  in  fraud  of  creditors.8  Thus  they 
may  sell  it,  mortgage  it,  or  turn  it  out  in  payment  of  their  part- 
nership debts.  They  may  assign  all  the  partnership  property 
for  the  benefit  of  the  partnership  creditors.  They  may  apply  it 
upon  all  partnership  debts  pro  rata,  or,  in  the  absence  of  a  statute 
forbidding  it,  they  may  prefer  one  partnership  creditor  to  an- 
other. They  may  unite  in  selling  all  the  partnership  property 
to  one  who  buys  in  good  faith  and  for  value ;  and  the  purchaser 
will  get  a  good  title,  even  though  the  partnership  was  insolvent 
and  the  partners  had  a  secret  intent  to  defraud  their  creditors 
or  afterwards  did  in  fact  misapply  the  proceeds.  In  all  of  these 
cases  the  partners  are  actually  or  ostensibly  using  the  partner- 
ship property  for  partnership  purposes. 

§  442.  Right  to  pay  joint  but  not  partnership  debts  out 

of  partnership  assets. — When,  however,  the  partners  attempt 
to  apply  the  partnership  assets  to  the  payment  of  any  other 
than  a  partnership  debt,  different  considerations  present  them- 

8  Thus  in  Beyburn  v.  Mitchell  poses,  but  this  is  a  right  or  lien 
(1891),  106  Mo.  365,  16  S.  W.  592,  which  they  may  waive.  Hence  the 
27  Am.  St.  E.  350,  the  court,  quot-  great  majority  of  adjudicated  cases 
ing  from  Sexton  v.  Anderson,  95  are  to  this  effect:  that  all  the  part- 
Mo.  381,  says:  "The  partners  may,  ners  may,  by  their  joint  act,  dis- 
eo  long  as  the  firm  exists,  do  with  pose  of  partnership  property  in 
their  property  as  they  see  fit.  The  liquidation  and  payment  of  a  debt 
firm  creditors  have  no  lien  on  the  owing  by  an  individual  member  of 
partnership  property  for  the  pay-  the  firm.  The  qualification  is  that 
ment  of  their  debts  while  the  firm  the  transaction  must  be  in  good 
continues  to  exist.  Partners  have  a  faith,  and  not  for  fraudulent  pur- 
right  to  have  the  partnership  prop-  poses." 
irty  applied  to  partnership  pur- 

378 


APPLICATION   OF   PARTNERSHIP   ASSETS  [  §  442 

selves.  The  first  question  will  be  whether  it  is  a  conveyance 
in  fraud  of  creditors.  Since  the  Statute  of  13  Elizabeth,  c.  5 
(A.  D.  1570)  at  least,  all  gifts,  grants,  conveyances,  etc.,  devised 
to  the  intent  to  delay,  hinder  or  defraud  creditors  and  others 
of  their  just  and  lawful  actions,  etc.,  are,  in  our  law,  held  to 
be  void  as  to  such  creditors.  Conveyances,  etc.,  made  upon  good 
consideration  and  bona  fide  are  not  within  this  rule.  Under 
this  rule  it  is  fraudulent  for  a  debtor  to  give  away  his  property, 
dispose  of  it  for  other  than  a  good  consideration,  or  use  it  to 
pay  debts  which  he  does  not  himself  owe,  if,  to  do  so,  will  hinder 
or  delay  his  creditors  in  securing  their  pay  out  of  his  property. 
To  fairly  use  all  his  property  to  pay  one  or  part  of  his  debts  is, 
however,  not  at  common  law  fraudulent,  even  though  the  result 
is  that  there  is  nothing  left  to  pay  others.  The  common  law 
permitted  the  debtor  to  prefer  one  creditor  to  another.  To  give 
away  something,  etc.,  was  not  fraudulent,  if  the  debtor  fairly 
reserved  enough  to  pay  his  debts.  All  of  these  rules  apply  to 
partners,  but  how? 

May  the  partners  lawfully  use  the  partnership  property  to 
pay  a  joint  debt  of  the  partners  which  is  not  a  partnership 
debt,  leaving  the  partnership  debts  unpaid  ?  If  the  partnership 
were  a  legal  entity  this  might  not  be  done.9  The  entity  would 
be  using  its  property  to  pay  debts  it  did  not  owe.  It  would  be 
equivalent  to  a  gift.  A  corporation,  for  example,  may  not  law- 
fully use  the  corporate  property  to  pay  the  individual  debts  of 
the  corporators,  leaving  the  corporate  debts  unpaid.  But  the 
partnership  is  not  usually  regarded  as  an  entity;  so  that  this 
does  not  settle  the  question.  By  the  hypothesis,  it  is  a  debt  which 
they  all  owe;  but  they  do  not  owe  it  as  partners.  The  part- 
nership assets  are  contributed  for  partnership  purposes.  Each 
partner  has  a  so-called  lien  which  would  prevent  their  being 
applied  otherwise.  But  here  no  one  asserts  that  lien;  all  are 
willing  to  waive  it;  all,  by  the  hypothesis,  consent  that  the 
partnership  assets  shall  be  applied  to  the  payment  of  this  debt. 
Who  else  can  object?  The  partnership  creditors  have  no  lien. 
Their  rights,  it  is  said,  must  be  worked  out  through  the  lien  of 

9  See  e.  g.,  Kichards  v.  Le  Veille  Burd.  Cas.  281,  which  is  put  upon 
(1895),  44  Neb.  38,  62  N.  W.  304,  this  ground. 

379 


442] 


LAW   OF   PARTNERSHIP 


the  partners.  But  this,  by  the  hypothesis,  has  been  waived  by 
the  partners  themselves.  May  it  thus  be  waived  at  the  expense 
of  the  partnership  creditors?  It  is  said  in  some  cases  that  such 
a  disposition  of  the  partnership  property  is  not  fraudulent  as 
to  the  partnership  creditors.10  The  better  reason,  it  is  believed, 
condemns  it.  As  against  the  partnership  creditors  the  partner- 
ship assets  should  not  be  capable  of  a  transfer  except  for  a 
partnership  debt  or  a  consideration  moving  to  the  partnership.11 
The  proposed  Uniform  Fraudulent  Conveyance  Act  expressly 
adopts  this  view.12 

A  theory  analogous  to  the  so-called  "trust-fund  theory"  which 
has  been  much  resorted  to  in  dealing  with  the  application  of  the 
assets  of  corporations,  might  be  made  available  here,  namely, 
that  the  assets  of  a  partnership  are  a  species  of  trust  fund,  not 


10  Thus     in     Saunders    v.     Eeilly 
(1887),  105  N.  Y.  12,  12  N.  E.  170, 
59  Am.   Eep.  472,  Burd.   Gas.   277, 
the  court  say:   "All  members  of  a 
firm  may  sell  the  partnership  prop- 
erty, even  if  wholly  insolvent,  to  a 
purchaser   in   good   faith,  and   thus 
convey,  free  from  the  claim  of  firni 
creditors,  a  good  title  to   the  firm 
property.      Instead    of    selling    for 
cash,  they  may  transfer  firm  prop- 
erty to  pay  a  firm  debt.     And  they 
may  transfer   the   firm   property   to 
pay  a  joint  debt  for  which  they  are 
jointly    liable    outside   of   the   busi- 
ness of  the  firm,  and  the  joint  cred- 
itor will  obtain  a  good  title  to  the 
firm    property."      To    same    effect: 
Citizens'  Bank  v.  Williams    (1891), 
128  N.  Y.  77,  28  N.  E.  33,  26  Am. 
St.    E.    454,    Mechem's    Gas.    1050, 
Gilm.  Gas.  289. 

11  See   Whelan   v.    Shain    (1896), 
115  Gal.  326,  47  Pac.  57,  Burd.  Gas. 
283,  Gilm.  Gas.  288. 

12  Sec.  8.      [Conveyance   of  Part- 
nership   Property.]      Every    convey- 
ance   of    partnership    property    and 
every     partnership     obligation     in- 


curred when  the  partnership  is  or 
will  be  thereby  rendered  insolvent  is 
fraudulent  as  to  partnership  cred- 
itors, if  the  conveyance  is  made  or 
obligation  is  incurred — 

(a)  To  a  partner,  whether  with 
or  without  a  promise  by  him  to  pay 
partnership  debts,  or 

(6)  To  a  person  not  a  partner 
without  a  fair  consideration  to  the 
partnership  as  distinguished  from 
consideration  to  the  individual  part- 
ners. 

The  same  statute,  Sec.  2  (2),  pro- 
vides that  "In  determining  whether 
a  partnership  is  insolvent,  there 
shall  be  added  to  the  partnership 
property  the  present  fair  salable 
value  of  the  separate  assets  of  each 
general  partner  in  excess  of  the 
amount  probably  sufficient  to  meet 
the  claims  of  his  separate  creditors, 
and  also  the  amount  of  any  unpaid 
subscription  to  the  partnership  of 
each  limited  partner,  provided  the 
present  fair  salable  value  of  the 
assets  of  such  limited  partner  is 
probably  sufficient  to  pay  his  debts, 
including  such  unpaid  subscription." 


380 


APPLICATION  OF  PARTNERSHIP  ASSETS  [§  443 

applicable  to  other  purposes  until  all  partnership  purposes,  in- 
cluding the  payment  of  the  partnership  debts,  have  been  sat- 
isfied. 

§  443.  Right  to  pay  individual  debts  of  all  of  the  part- 

ners. — A  somewhat  similar  question  is  presented  where  the 
partners  attempt  to  use  the  partnership  property  to  pay  the 
individual  debts  of  the  partners  severally.  It  could  not  law- 
fully be  done  by  one  partner  without  the  other's  consent.  The 
partner's  so-called  lien  would  prevent  that.  For  the  other  to 
give  his  consent  without  any  corresponding  advantage  to  himself 
would  be  equivalent  to  a  gift  of  his  interest  in  the  property  so 
used,  and  therefore  objectionable.  But  suppose  each  partner 
wished  to  pay  his  individual  debt  out  of  the  partnership  prop- 
erty, and  the  debts  in  question  bore  a  substantial  relation  to 
each  partner's  interest  in  the  property.  Their  mutual  release 
of  their  liens  would  furnish  a  good  consideration.  The  debts, 
by  the  hypothesis,  are  valid  debts,  and  it  is  usually  most  com- 
mendable to  pay  them.  The  debtor,  at  common  law,  may  prefer 
one  creditor  to  another.  It  seems  quite  unobjectionable,  then, 
to  use  the  partnership  property  to  pay  these  debts  rather  than 
the  partnership  debts,  unless  there  is  something  in  the  fact  that 
the  latter  are  partnership  debts  which  should  give  them  priority. 
The  entity  theory,  again,  would  prevent  such  a  use  of  the  part- 
nership property.  So  would  such  a  trust-fund  theory  as  has 
been  suggested.  A  number  of  cases  have  held  such  a  use  per- 
missible.13 A  number  have  held  the  contrary.  Here,  also,  it 

13  In  Goddard-Peek  Grocery  Co.  Brenneisen,  97  Mo.  148,  and  cased 
v.  McCune  (1894),  122  Mo.  426,  25  cited  in  each.  The  principle  we 
S.  W.  904,  29  L.  E.  A.  681,  Me-  think  equally  well  settled  by  the 
chem's  Gas.  613,  the  court  says:  more  recent  decisions  of  this  court, 
"No  principle  of  law  is  better  set-  as  well  as  by  the  weight  of  judicial 
tied  than  that,  in  the  administration  authority  in  other  jurisdictions,  that 
of  an  insolvent  partnership  estate,  the  assets  of  an  insolvent  firm,  be- 
the  assets  of  the  firm  must  be  ap-  fore  dissolution,  may,  with  the  con- 
plied  to  the  satisfaction  of  the  firm  sent  of  all  the  partners,  be  applied 
creditors  to  the  exclusion  of  the  to  the  satisfaction  of  all  the  indi- 
creditors  of  the  individual  partners.  vidual  debts  of  the  members  of  the 
Hundley  v.  Farris,  103  Mo.  78,  12  firm,  when  done  in  good  faith.  Sex- 
L.  E.  A.  254;  First  Nat.  Bank  v.  ton  v.  Anderson,  95  Mo.  380;  Rey- 

381 


§443] 


LAW  OP  PARTNERSHIP 


is  believed  that  right  theory  forbids  such  an  application  of  the 
partnership  assets,  and  that  their  transfer  should  only  be  per- 
mitted, so  far  as  partnership  creditors  are  concerned,  where  the 
consideration  moves  to  the  partnership.14  The  Uniform  Fraud- 


burn  v.  Mitchell,  106  Mo.  365 
(supra),  and  cases  cited  in  each; 
Seger's  Sons  v.  Thomas  Bros.,  107 
Mo.  635.  As  Phelps  v.  McNeely,  66 
Mo.  555,  27  Am.  Eep.  378,  is  in  con- 
flict with  the  cases  last  cited  and  the 
great  weight  of  authority,  it  should 
not  be  followed  and  is  overruled." 
In  Fisher  v.  Syfers  (1887),  109 
Ind.  514,  10  N.  E.  306,  it  is  said: 
"The  rule  that  obtains  in  the  dis- 
tribution of  the  estate  of  partners, 
and  under  which  partnership  cred- 
itors are  entitled  to  priority  of 
payment  out  of  the  partnership 
assets,  is  an  equitable  doctrine  for 
the  benefit  and  protection  of  the 
partners  respectively.  Partnership 
creditors  have  no  lien  upon  part- 
nership property;  their  rignt  to 
priority  of  payment  out  of  the  firm 
assets,  over  the  individual  cred- 
itors, is  always  worked  out  through 
the  liens  of  the  partners.  Warren 
v.  Farmer,  100  Ind.  593;  Trentman 
v.  Swartzell,  85  Ind.  443.  Upon 
the  death  of  one  partner,  or  where 
the  firm  becomes  bankrupt,  or 
where  the  partnership  assets  are 
being  administered  by  a  court,  the 
rule  of  equitable  distribution  is 
applicable  to  its  fullest  extent. 
Where,  however,  the  partners  have 
the  possession  and  control  of  their 
own  property,  they  have  the  right 
to  make  any  honest  disposition  of 
it  they  see  fit;  each  has  the  right 
to  waive  his  equitable  lien,  and  to- 
gether they  may  sell,  assign  or 
mortgage  the  property  of  the  firm 


to  pay  or  secure  either  an  individ- 
ual debt  of  one  of  the  partners,  or 
the  debts  of  the  firm. ' ' 

See,  also,  Purple  v.  Farrington 
(1889),  119  Ind.  164,  25  N.  E.  Eep. 
904,  4  L.  E.  A.  535 ;  Ellison  v.  Lucas 
(1891),  87  Ga.  223,  13  S.  E.  445,  27 
Am.  St.  E.  242;  Smith  v.  Smith 
(.1893),  87  Iowa  93,  54  N.  W.  73,  43 
Am.  St.  E.  359;  First  Nat.  Bank  v. 
Brubaker  (1905),  128  Iowa  587,  105 
N.  W.  116,  2  L.  E.  A.  (N.  S.)  256, 
111  Am.  St.  E,  209 ;  Kincaid  v.  Wall 
Paper  Co.  (1901),  63  Kan.  288,  65 
Pac.  247,  88  Am.  St.  E.  243,  54  L. 
E.  A.  412;  Armstrong  v.  Carr 
(1895),  116  N.  Car.  499,  21  S.  E. 
175;  Eeynolds  v.  Johnson  (1891), 
54  Ark.  449,  16  S.  W.  124;  Sargent 
v.  Blake  (1908),  87  C.  C.  A.  213, 
160  Fed.  57,  15  Ann.  Gas.  58,  17 
L.  E.  A.  (N.  S.)  1040;  Wiggins  v. 
Blackshear  (1894),  86  Tex.  665,  26 
S.  W.  939,  Burd.  Gas.  198;  Stahl  v. 
Osmers  (1897),  31  Oreg.  199,  49 
Pac.  958,  Mechem's  Gas.  579,  Burd. 
Gas.  237.  Compare  Teague  v.  Lind- 
sey  (1894),  106  Ala.  266,  17  So. 
538. 

14  See  Jackson  Bank  v.  Durf ey 
(1895),  72  Miss.  971,  18  So.  456,  48 
Am.  St.  E.  596,  31  L.  E.  A.  470,  Me- 
chem's  Gas.  619,  Burd.  Gas.  201; 
Menagh  v.  Whitwell  (1873),  52  N. 
Y.  146,  11  Am.  Eep.  683,  Mechem  »s 
Cas.  567,  Ames '  Gas.  229,  Burd.  Gas. 
222,  Gilm.  Cas.  251;  Bannister  v. 
Miller  (1895),  54  N.  J.  Eq.  121,  701, 
32  Atl.  1066,  Burd.  Cas.  207. 


APPLICATION  OP   PARTNERSHIP  ASSETS 


[§444 


ulent  Conveyance  Act  adopts  this  view.16  If  the  only  persons 
interested  are  the  partners  themselves,  any  arrangement  satis- 
factory to  them  would  ordinarily  be  unobjectionable. 

§  444. Eight  to  assume  or  pay  individual  debt  of  one 

partner.  — Whether,  however,  the  partners  may  apply  the  part- 
nership property  in  payment  of  the  individual  debt  of  one  of  the 
partners  where  no  consideration  moves  to  the  others  has  been 
much  disputed.  It  is  conceded  that  they  may  do  this  if  they 
reserve  enough  to  satisfy  the  partnership  creditors ; 16  but  where 
the  partnership  is  already  insolvent,  or  where  such  an  applica- 
tion will  leave  it  insolvent  and  unable  to  pay  the  partnership 
debts,  there  is  controversy. 

It  is  held,  on  the  one  hand,  that  if  the  firm  is  then  insolvent, 
or  if  such  an  application  of  their  assets  will  make  them  insolvent, 
it  would  be  fraud  upon  the  partnership  creditors  to  permit  such 
an  application,  and  it  will  therefore  not  be  allowed.17 


15  See   Sec.   8,  quoted  in  note  to 
preceding  section. 

16  See      Schmidlapp      v.       Currie 
(1878),  55  Miss.  597,  30  Am.  Eep. 
530;    Hage  v.  Campbell   (1891),  78 
Wis.  572,  47  N.  W.  179,  23  Am.  St. 
K.  422,  Mechem's  Gas.  609;   Wood- 
mansie  v.  Holcomb  (1885),  34  Kan. 
35,    7   Pac.    603;    Jewett    v.    Meech 
(1884),  101  Ind.  289. 

17  See     Ransom     v.     Vandeventer 
(1863),  41  Barb.  (N.  Y.)  307;  Wil- 
son v.  Robertson   (1860),  21  N.  Y. 
587;     Bartlett     v.      Meyer-Schmidt 
Grocery  Co.  (1898),  65  Ark.  290,  45 
S.   W.   1063,   Mechem's   Gas.   1062; 
Hage   v.   Campbell,  supra;   Menagh 
v,  Whitwell  (1873),  52  N.  Y.  146,  11 
Am.  Rep.  683,  Mechem's  Gas.   567, 
Ames'    Gas.    229,    Burd.    Gas.    221, 
Gilm.     Gas.     251;     Bulger    v.    Rosa 
(1890),   119    N.   Y.    459,   24   N.   E. 
853;    Kurner  v.  O'Neil    (1894),  39 
W.  Va.  515,  20  S.  E.  589;   Hill  v. 


Draper  (1894),  58  Ark.  625,  24  S. 
W.  1075. 

In  Arnold  v.  Hagerman  (1888), 
45  N.  J.  Eq.  186,  17  Atl.  93,  14  Am. 
St.  R.  712,  Mechem  's  Gas.  602,  Gilm. 
Cas.  223,  the  court,  adopting  the 
language  of  Clements  v.  Jessup 
(1883),  36  N.  J.  Eq.  569,  says: 
"Partnership  creditors,  in  equity, 
have  an  inherent  priority  of  claim 
upon  partnership  property  over  in- 
dividual creditors;  and  a  transfer  of 
partnership  property  by  one  partner, 
with  the  consent  of  the  other  part- 
ners, or  by  all  the  partners,  to  pay 
individual  debts,  is  fraudulent  and 
void  as  to  firm  creditors,  unless  the 
firm  was  then  solvent  and  had  suffi- 
cient property  remaining  to  pay  the 
partnership  debts." 

The  indorsement  of  a  note  in  the 
firm  name  to  secure  the  liability  of 
one  of  the  partners  when  the  firm 
is  insolvent  is  not  fraudulent  as 


383 


§  445]  LAW  OF  PAKTNEBSHIP 

It  is  contended,  on  the  other  hand,  that  if  done  while  the  part- 
ners are  still  in  control  of  their  business,  they  may  make  such 
an  appplication,  if  they  act  in  good  faith,  though  they  were 
already  or  thereby  became  insolvent.18 

The  latter  view  seems  indefensible  in  point  of  theory,  as  it 
amounts  practically  to  a  gift  by  the  partners  not  benefited  to 
their  copartner.  The  Uniform  Fraudulent  Conveyance  Act  con- 
demns it.19 

§445.  -Right  of  partner  to  apply  individual  assets  to 

firm  debts. — Whether  one  partner  will  be  permitted  to  apply 
his  individual  assets  to  the  payment  of  the  firm  creditors  and 
thereby  exclude  his  own  separate  creditors,  as  by  making  an 
assignment  for  their  benefit  or  giving  them  the  preference  in 
assigning  his  estate,  is  a  question  upon  which  the  authorities  are 
in  some  conflict.  It  is  said,  on  the  one  hand,  that  inasmuch  as 
the  firm  creditors  are  equally  creditors  of  the  partners  as  indi- 
viduals, there  is  no  reason  why  the  individual  partner,  so  long 
as  he  has  control  of  his  own  assets,  should  not  pay  the  firm  debts 
out  of  his  own  estate  if  he  so  prefers.20  On  the  other  hand,  it  is 

against  firm  creditors,  provided  it  is  Atl.     16;      Anderdson     v.     Norton 

done  for  an  honest  purpose,  in  which  (1885),  83  Tenn.  14,  54  Am.  Hep. 

the    firm    was    interested    and   with  400;    Huiskamp    v.    Moline    Wagon 

the  consent  of  the  members  of  the  Co.  (1886),  121  U.  S.  310,  7  Sup.  Ct. 

firm,  and  the  indorsee  did  not  know  899,   30   L.  ed.   971;    Coffin  v.  Day 

that  the  firm  was  insolvent.     Bern-  (1888),    34    Fed.    687;    Sargent    v. 

heimer  v.  Eindskopf  (1889),  116  N.  Blake   (1908),  87  C.  C.  A.  213,  160 

Y.  428,  22  N.  E.  1074,  15  Am.  St.  E.  Fed.  57,  15  Ann.  Cas.  58,  17  L.  E. 

414.  A.  (N.  S.)  1040. 

Where  a  firm,   composed  of   two  19  See   Sec.   8,  quoted  in  note  to 

former    partners    and    an    incoming  second  section  preceding, 

partner,  at  the  time  of  formation  as-  20  See  Gallagher's  Appeal  (1886), 

sume  a  debt  of  the  former  firm,  it  114  Pa.  353,  7  Atl.  237,  60  Am.  E. 

may  properly   be   paid   out   of   the  350,  4  Sad.  297;  Newman  v.  Bagley 

firm  assets,  though  the  firm  is  insolv-  (1835),  16  Pick.  (Mass.)  570,  Burd. 

ent.     Peyser  v.  Myers    (1892),  135  Cas.  285;  Gadsden  v.  Carson  (1857), 

N.  Y.  599,  32  N.  E.  699.  9  Eich.  Eq.  (S.  C.)  252;  Chesher  v. 

18  See     Sigler    v.     Knox     County  Clamp    (1895),    10    Tex.    Civ.    App. 

Bank  (1858),  8  Ohio  St.  511;  Pep-  350,  30  S.  W.  466. 

per  v,  Peck  (1890),  17  B.  I.  55,  20  Where  the  partner  is  actually  in- 

384 


APPLICATION  OP   PARTNERSHIP  ASSETS  [  §  446! 

urged  that  the  separate  Creditors  have  a  first  claim  upon  the 
separate  assets,  and  to  permit  them  to  be  diverted  to  the  pay- 
ment of  the  firm  creditors  is  a  fraud  upon  the  separate  cred- 
itors.81 The  former  would  seem  to  be  the  better  view. 

§  446.  Right  of  partners  to  convert  firm  property  into 

Individual  property. — Intimately  connected  with  the  questions 
already  considered  is  that  of  the  right  of  the  partners,  by  any 
arrangement  among  themselves,  to  so  divest  themselves  of  their 
own  "lien"  upon  the  partnership  property  that  the  right  of 
the  firm  creditors  to  priority  of  payment  out  of  that  property — 
which  right,  as  has  been  seen,  is  commonly  said  to  depend  upon 
the  partners'  right — shall  be  cut  off.22  Thus,  for  example,  may 
the  partners  divide  the  partnership  property  among  themselves 
and  then  use  it  to  pay  their  separate  rather  than  their  partner- 
ship creditors?  May  one  partner  on  retiring  from  the  firm  sell 
out  all  of  his  interest  in  the  partnership  assets  to  his  copartner, 
who  continues  the  business,  in  such  a  way  that  the  latter  may, 
thereafter  apply  those  assets  to  the  payment  of  his  individual 
debts  to  the  exclusion  of  the  firm  creditors  ?  May  both  partners 
by  selling  to  a  third  person  thus  divest  their  firm  creditors  of 
their  priorities  in  the  property  so  sold? 

These  questions  are  but  another  form  of  that  already  consid- 
ered, namely,  the  right  of  the  partners  to  apply  firm  assets  to 

debted   to  the  partnership,  a   ~bona  obviously  much  less  danger  of  loss  to 

fide  transfer  of  his  separate  estate  the  partnership  creditors  where  the 

to  the  firm  in  payment  or  security  of  partners  or  some  of  them  retain  the 

that  debt,  cannot  be  impeached  by  title    to    the    partnership    property, 

his  separate   creditors:    Winslow  v.  than  where  they  convey  it  to  some 

Wallace  (1888),  116  Ind.  317,  17  N.  one  else.    While  they  or  any  of  them 

E.  923,  1  L.  E.  A.  179,  Mechem's  hold  it,  it  is  just  as  much  open  to 

Gas.   658.      (Here  they  were  subse-  seizure  on  execution  by  the  partner- 

quent  creditors,  also.)  ship  creditors  as  individual  property 

21  See   Holton  v.    Holton    (1860),  as  it  would  be  if  partnership  prop- 
40  N.  H.  77,  Ames'  Gas.  332;  Jack-  erty.     It  is  when  they  attempt  to 
son  v.  Cornell  (1844),  1  Sandf.  (N.  mortgage,   assign  or  transfer  it   as 
Y.)  Ch.  348.  individual  property  that  the  partner - 

22  See     ante,     §  436.       There     is  ship  creditor  is  chiefly  endangered. 

Mech.  Part.— 25  385 


§  447] 


LAW  OF  PARTNERSHIP 


the  payment  of  individual  debts.23  They  rest  upon  substantially 
the  same  considerations  and  present  substantially  the  same  con- 
flict of  opinion.  That  solvent  partners,  acting  in  good  faith, 
may  do  so,  seems  to  be  conceded.24  That  it  may  also  be  done, 
though  the  partners  are  not  solvent,  if  done  in  good  faith  and 
for  an  adequate  consideration  moving  to  the  partnership,  would 
doubtless  be  held.  That  it  may  be  done  under  similar  circum- 
stances even  though  the  consideration  moves  to  the  partners 
individually  has  also  been  held,26  though  this  view  is  believed 
to  be  entirely  unsound  wherever  it  substantially  hinders,  delays 
or  defeats  the  partnership  creditors.26 

§447.  Whether  the  mere  assumption  of  the  debts  by 

the  continuing  partner  is  a  sufficient  consideration  has  at  times 
been  in  question.  In  one  case  27  it  is  said :  ' '  It  is  clear  that  while 
the  partnership  is  solvent  and  going  on,  the  partners  may,  by 


23  See  ante,  §  444. 

24  See  Ex  parte  Euffin   (1801),  6 
Ves.     119,     Mechem's     Gas.     1038, 
Ames'    Gas.    192,    Burd.    Gas.    192, 
Gilm.    Gas.   217;    Dimon  v.   Hazard 
(1865),  32  N.  Y.  65,  Mechem's  Gas. 
1043;  Fulton  v.  Hughes  (1885),  63 
Miss.     61;      Stanton     v.     Westover 
(1886),    101    N.    Y.    265,    4   N.    E. 
529;   Ketchum  v.  Durkee   (1846),  1 
Barb.  (N.  Y.)  Ch.  480,  45  Am.  Dec. 
412;   Eeese  v.  Bradford   (1848),  13 
Ala.    837;    In   re    Denning    (1902), 
114  Fed.  219. 

25  See  Allen  v.  Center  Valley  Co. 
(1851),  21  Conn.  130,  54  Am.  Dec. 
333;    Howe  v.   Lawrence    (1852),   9 
Gush.  (Mass.)  553,  57  Am.  Dee.  68, 
Ames'    Gas.    213;    Lee    v.    Bradley 
Fertilizer  Co.    (1902),  44  Fla.  787, 
33  So.  456;  In  re  Suprenant  (1914), 
217  Fed.  470. 

The  right  of  the  partners  to  di- 
vide the  partnership  property  among 
themselves  with  a  view  to  then  claim- 
ing individual  exemptions  in  it,  has 


been  sustained  in  a  number  of  eases : 
Lee  v.  Bradley  Fertilizer  Co.,  supra; 
Bates  v.  Callender  (1883),  3  Dak. 
256,  16  N.  W.  506;  Harris  v.  Viss- 
cher  (1876),  57  Ga.  229;  Goudy  v. 
Werbe  (1888),  117  Ind.  154,  19  N. 
E.  764,  3  L.  E.  A.  114;  Worman  v. 
Giddey  (1874),  30  Mich.  151;  Wat- 
son v.  McKinnon  (1889),  73  Tex. 
210,  11  S.  W.  197;  O 'Gorman  v. 
Fink  (1883),  57  Wis.  649,  15  N.  W. 
771,  46  Am.  E.  58. 

26  See  In  re  Denning  (1902),  114 
Fed.  219;  In  re  Dillon  (1900),  100 
Fed.  627;  Smith  v.  Heineman 
(1897),  118  Ala.  195,  24  So.  364, 
72  Am.  St.  E.  150. 

27 Darby  v.  Gilligan  (1889),  33  W. 
Va.  246,  10  S.  E.  400,  6  L.  E.  A. 
740,  Gilm.  Cas.  221,  citing  many 
cases.  See,  also,  Millhiser  v.  Mc- 
Kinley  (1900),  98  Va,  207,  35  S.  E. 
446.  Denied  in  Sargent  v.  Blake 
(1908),  87  C.  C.  A.  213,  160  Fed. 
57,  15  Ann.  Cas.  58,  17  L.  E.  A. 
(N.  S.)  1040. 


386 


APPLICATION   OF   PARTNERSHIP  ASSETS  [§448 

unanimous  assent  or  joint  act,  do  what  they  please  with  the 
assets,  if  the  act  is  ~boiia  fide.  Where,  in  such  case,  one  partner 
sells  or  assigns  his  interest  to  the  other,  ~bona  fide,  for  a  valuable 
consideration,  or  an  agreement  to  pay  the  debts  of  the  firm,  and 
indemnify  against  them,  this  will  change  the  joint  into  a  sep- 
arate property.  The  only  question  is  upon  the  Ixma  fides  of  the 
transaction.  If  such  an  arrangement  could  not  be  made,  a  part- 
ner could  never  retire.  On  the  other  hand,  according  to  the 
better  reason  and  the  weight  of  authority,  if  the  firm  is  insolvent, 
or  on  the  eve  of  insolvency,  and  both  of  the  partners  are  insolv- 
ent, a  purchase  by  one  partner  of  the  interest  of  the  other,  in 
consideration  of  the  former's  assumption  of  all  the  debts  of  the 
firm,  will  be  regarded  as  a  purchase  upon  a  consideration  which 
is  of  no  value  whatever ;  and,  no  equivalent  having  been  given, 
the  transfer  is  in  effect  voluntary,  and  its  only  effect,  if  sus- 
tained, would  be  to  hinder  partnership  creditors,  and  hence  is 
deemed  ineffectual  to  convert  the  joint  property  into  separate 
property  as  against  the  firm  creditors.'' 

The  proposed  Uniform  Fraudulent  Conveyance  Act,28  as  has 
been  seen,  will  remove  many  of  the  doubts.  It  provides  that 
"every  conveyance  of  partnership  property,  and  every  partner- 
ship obligation  incurred,  when  the  partnership  is  or  will  be 
thereby  rendered  insolvent  is  fraudulent  as  to  partnership  cred- 
itors, if  the  conveyance  is  made  or  obligation  is  incurred — 

(a)  To  a  partner,  whether  with  or  without  a  promise  by  him 
to  pay  partnership  debts,  or 

(&)  To  a  person  not  a  partner  without  fair  consideration  to 
the  partnership  as  distinguished  from  consideration  to  the  in- 
dividual partners/' 

§  448.  Another  view  of  similar  transactions  leading  to 

the  same  result  is  that  where  there  is  an  express  stipulation  that 
the  continuing  partner  shall  pay  the  debts  this  operates  not  to 
release  but  to  continue  the  selling  partner's  lien  upon  the  assets, 
unless  expressly  waived,  and  therefore  the  firm  creditors  may 

28  Sec.  8. 

387  • 


§449] 


LAW  OF  PAKTNERSHIP 


still  work  out  their  priority  through  his  lien,  until  the  property 
has  come  into  the  hands  of  a  bona  fide  purchaser.29 

§  449.  III.  Application  of  assets  when  distributed  by  court — 
Firm  creditors  first  paid  out  of  firm  assets. — When,  however, 
the  management  of  the  partnership  assets  is  taken  out  of  the 
hands  of  the  partners — who  have  made  no  valid  previous  dispo- 
sition of  them  80 — and  put  under  the  control  of  the  court,  as  in 
case  of  dissolution,  bankruptcy  proceedings,  the  settlement  of 
insolvent  estates  in  courts  of  equity,  or  the  like,  a  different  rule 
prevails.  Acting  here  upon  the  presumed  intention  and  desire 
of  each  partner  that  the  partnership  assets  shall  be  applied  to 
the  discharge  of  the  partnership  liabilities,  the  courts  apply 
them  first  to  that  purpose,  and  exclude  the  individual  creditors 


29 See  Bulger  v.  Kosa  (1890),  119 
N.  Y.  459,  24  N.  E.  853;  Olson  v. 
Morrison  (1874),  29  Mich.  395; 
Thayer  v.  Humphrey  (1895),  91 
Wis.  276,  64  N.  W.  1007,  30  L.  E.  A. 
549,  51  Am.  St.  E.  887,  Burd.  Gas. 
117,  Gilm.  Gas.  546. 

30  Thus,  in  Case  v.  Beauregard 
(1878),  99  U.  S.  119,  25  L.  ed.  370, 
Mechem's  Gas.  596,  Ames'  Gas.  246, 
Gilm.  Gas.  226,  it  is  said:  "The 
right  of  each  partner  extends  only 
to  the  share  of  what  may  remain 
after  payment  of  the  debts  of  the 
firm  and  a  settlement  of  its  ac- 
counts. Growing  out  of  the  right, 
or  rather  included  in  it,  is  the 
right  to  have  the  partnership  prop- 
erty applied  to  the  payment  of  the 
partnership  debts  in  preference  to 
those  of  any  individual  partner. 
This  is  an  equity  that  partners 
have  between  themselves,  and  in 
certain  circumstances  it  inures  to 
the  benefit  of  the  creditors  of  the 
firm.  The  latter  are  said  to  have 
the  privilege  or  preference,  some- 
times loosely  denominated  a  'lien,' 


to  have  the  debts  due  to  them  paid 
out  of  the  assets  of  a  firm  in  course 
of  liquidation  to  the  exclusion  of 
the  creditors  of  its  several  mem- 
bers. This  equity  is  a  derivative 
one.  It  is  not  held  or  enforceable 
in  their  own  right.  It  is  practi- 
cally a  subrogation  to  the  equity  of 
the  individual  partner,  to  be  made 
effective  only  through  him.  Hence, 
if  he  is  not  in  a  condition  to  en- 
force it,  the  creditors  of  the  firm 
cannot  be.  Eice  v.  Barnard,  20 
Vt.  479,  50  Am.  Dec.  54;  York 
County  Bank's  Appeal,  32  Pa.  St. 
446.  But  so  long  as  the  equity  of 
the  partner  remains  in  him — so 
long  as  he  retains  an  interest  in 
the  firm  assets  as  a  partner — a 
court  of  equity  will  allow  the  cred- 
itors of  the  firm  to  avail  them- 
selves of  his  equity  and  enforce 
through  it  the  application  of  those 
assets  primarily  to  the  payment  of 
the  debts  due  them  whenever  the 
property  comes  under  its  adminis- 
tration. ' ' 


388 


APPLICATION  OP  PARTNERSHIP  ASSETS 


[§450 


of  the  partners  from  participation  until  the  partnership  cred- 
itors are  paid.  The  Federal  Bankruptcy  Act  adopts  this  rule, 
in  explicit  terms,81  and  so  also  does  the  Uniform  Partnership 
Act.88 

So  where  firm  property  has  been  levied  upon  for  the  individ- 
ual debt  of  one  partner,  inasmuch  as  the  only  interest  which 
can  ordinarily  be  so  sold  is  the  partner's  share  in  the  final  sur- 
plus,83 such  levy  must  yield  priority  to  subsequent  levies  for 
debts  due  to  the  partnership  creditors.84  And  the  same  result 
will  ensue  where  one  partner  has  mortgaged  or  otherwise  incum- 
bered  his  interest  in  the  partnership  property  to  secure  his  sep- 
arate creditors.85 

But  where  all  of  the  partners  themselves,  while  the  assets  re- 
mained under  their  control,  have  created  valid  liens  upon  the 
property,  the  court  in  administering  the  estate  will  give  such 
liens  effect.86 

§  450.  Same  subject — Joint  but  not  partnership  creditors  not 
preferred. — The  reasons  which  operate  to  give  firm  creditors 


31  Sec.  5,  subd.  /,  ' '  The  net  pro- 
ceeds  of    the    partnership    property 
shall   be  appropriated   to   the   pay- 
ment    of     the     partnership     debts, 
and   the  net  proceeds   of   the   indi- 
vidual estate  of  each  partner  to  the 
payment    of    his    individual    debts. 
Should   any   surplus  remain   of   the 
property  of  any  partner  after  pay- 
ing his  individual  debts,  such   sur- 
plus shall  be  added  to  the  partner- 
ship assets  and  be   applied  to  the 
payment   of  the  partnership   debts. 
Should  any  surplus  of  the  partner- 
ship property  remain  after  paying 
the  partnership  debts,  such  surplus 
shall  be  added  to  the  assets  of  the 
individual  parties  in  the  proportion 
of  their  respective  interests  in  the 
partnership. ' ' 

32  Sec.  40,  subd.  Ji.    "When  part- 
nership property  and  the  individual 
properties  of  the  partners  are  in  the 


possession  of  a  court  for  distribu- 
tion, partnership  creditors  shall  have 
priority  on  partnership  property, 
and  separate  creditors  on  individual 
property,  saving  the  rights  of  lien 
or  secured  creditors  as  heretofore." 

83  See  ante,  §  148. 

34Jarvis  v.  Brooks  (1853),  27  N. 
H.  37,  59  Am.  Dec.  359;  Conroy  v. 
Woods  (1859),  13  Cal.  626,  73  Am. 
Dec.  605;  Bullock  v.  Hubbard 
(1863),  23  Cal.  495,  83  Am.  Dec. 
130;  Pierce  v.  Jackson  (1810),  6 
Mass.  242,  Ames'  Gas.  293;  Meech 
v.  Allen  (1858),  17  N.  Y.  300,  72 
Am.  Dec.  465,  Mechem's  Gas.  677, 
Ames'  Gas.  326,  Gilm.  Gas.  499. 

35  Ewart  v.  Mercantile  Co.  (1895), 
130  Mo.  112,  31  S.  W.  1041. 

36  Smith     v.     Smith     (1893),     87 
Iowa  93,  54  N.  W.  73,  43  Am.  St. 
E.  359. 


389 


§  451]  LAW  OF  PARTNERSHIP 

as  such  a  preference  in  payment  out  of  firm  assets  operate  to 
exclude  from  suck  priority  any  who  do  not  stand  in  that  rela- 
tion. It  is  consequently  generally  held  in  this  country  that  the 
joint  creditors  of  the  partners  as  individuals,  not  being  part- 
nership creditors,  will,  in  a  judicial  distribution,  be  excluded 
from  participation  in  the  partnership  assets  until  the  firm  cred- 
itors are  paid.87  The  English  courts  have  held  the  contrary.38 

A  number  of  American  courts  have  held  the  contrary  where 
the  question  arose  in  controversies  as  to  the  right  of  partnership 
creditors  to  priority  over  an  earlier  levy  by  a  creditor  of  all 
the  partners  jointly,  though  not  a  partnership  creditor.39 

The  rule  in  bankruptcy  excludes  the  joint  non-partnership 
creditor  in  favor  of  the  partnership  creditor.40 

As  has  been  already  seen,  an  obligation  may  be  shown  to  be 
a  partnership  obligation  in  fact — and  hence  entitled  to  be  paid 
out  of  partnership  assets — although  it  was  made  in  the  individ- 
ual names  of  the  partners  instead  of  the  firm  name.41 

§451.  Same  subject — Partner  cannot  compete  with  firm 
creditors. — So,  if  the  partnership  be  indebted  to  one  partner, 
inasmuch  as  he  is  himself,  as  a  member  of  the  partnership,  one 
of  the  persons  from  whom  his  claim  is  due,  and  is  therefore  at 
once  both  debtor  and  creditor,  while  as  to  the  claims  of  strangers 
against  the  partnership  he  is  a  debtor  simply,  it  is  clear  that 
he  is  not  strictly  a  partnership  creditor  within  the  rule  which 

37  See  Forsyth  v.  Woods   (1870),  38  See    Hoare    v.    Oriental    Bank 

11  Wall.   (U.  S.)  484;  Second  Nat.  (1877),  L.  R.  2  App.  Cas.  589. 

Bank  v.  Burt  (1883),  93  N.  Y.  233;  39 See  Saunders  v.  Reilly   (1887), 

Turner  v.  Jaycox  (1869),  40  N.  Y.  105  N.  Y.  12,  12  N.  E.  170,  59  Am. 

470;   Whelan  v.   Shain    (1896),  115  Rep.   472,  Burd.   Cas.   277;    Steiner 

Cal.   326,   47   Pac.   57;    Dunniea   v.  v.  Peters  Store  Co.  (1898),  119  Ala. 

Clinkscales   (1881),  73  Mo.  500.  371,  24  So.  576;  Couchman  v.  Mau- 

Where  there  is  but  one  partner-  pin  (1879),  78  Ky.  33. 

ship,  though  it  has  several  branches,  40  See    In    re   Nims    (1879),    16 

all  of  the  assets  are  to  be  admin-  Blatchf.    439;     In    re    Weisenberg 

istered  as  a  unit:     In  re  Vetterlein  (1904),  131  Fed.  517. 

(1890),    44    Fed.    57.      Otherwise,  41  See  ante,  §295;  Rouse  v.  Wal- 

where  there  were  really  distinct  part-  lace    (1897),   10  Colo.  App.  93,  50 

nerships;      Gay  v.  Ray   (1907),  195  Pac.  366. 
Mass/8,  80  N.  E.  693;  post,  §461. 

390 


APPLICATION  OF   PAETNERSHIP   ASSETS 


[§451 


gives  such  creditors  priority.  It  is  settled,  therefore,  that  he 
cannot  compete  with  the  latter  class  in  securing  payment  out 
of  the  assets  of  the  partnership ; 42  neither  can  his  own  creditors, 
or  others  standing  simply  in  his  shoes,43  by  virtue  of  his  claim, 
be  permitted  to  so  compete. 

"To  that  rule,"  said  Lord  Eldon,  "there  is  an  exception,  man- 
ifestly founded  in  justice,  and  that  is  where  a  partner  becomes 
a  creditor  in  respect  of  the  fraudulent  conversion  of  his  separate 
estate  to  the  use  of  the  partnership. ' ' 44  Another  exception  to 
this  rule  has  been  made  in  England  where  the  firm  and  the 
partner  were  carrying  on  separate  trades,  and  the  claim  was 
due  in  respect  of  goods  furnished  by  one  to  the  other  as  such 
separate  traders ;  **  but  this  exception  has  not  been  approved  in 
the  United  States.46 

Some  other  exceptions  have  also  been  made,  as  where  the 
claimant  partner  has  been  discharged  from  liability  for  the 
partnership  debts  and  therefore  is  no  longer  one  of  the  debtors,47 
or  his  liability  has  been  barred  by  the  statute  of  limitations,48 
and  he  has  afterward  become  a  creditor  of  the  firm. 


42  See  Edison  Illuminating  Co.  v. 
DeMott  (1893),  51  N.  J.  Eq.  16,  25 
Atl.  952;  Ex  parte  Blythe   (1881), 
16   Ch.   Div.    620;    Bonwit   v.    Hey- 
man  (1895),  43  Neb.  537,  61  N.  W. 
716;  McCruden  v.  Jonas  (1896),  173 
Pa.  507,  34  Atl.  224,  51  Am.  St.  R. 
774,    Burd.    Cas.    478;    In   re    Rice 
(1908),  164  Fed.  509;  In  re  Telfer 
(1910),  106  C.  C.  A.  366,  184  Fed. 
224  (under  present  bankruptcy  act). 

43  McCruden     v.      Jonas,     supra. 
Where  the  claim  is  a  negotiable  in- 
strument,  the   T)ona  fide  transferee 
for   value   will    stand    on   a   better 
footing.     See  Millers  River  Bank  v. 
Jefferson    (1884),    138    Mass.    Ill, 
Gilm.  Cas.  563;  McCruden  v.  Jonas, 
supra;  Parsons  v.   Tillman    (1884), 
95    Ind.   452;    First   Nat.    Bank   v. 
Wood  (1891),  128  N.  Y.  35,  27  N. 
E.  1020. 


44  See  Ex  parte  Sillitoe  (1824)   I 
Glyn  v.  Jam.  374,  Ames'  Cas.  428, 
Gilm.  Cas.  569. 

45  See  Ex  parte  Sillitoe,  supra;  Ex 
parte   Cook    (1831),   Montagu,    228, 
Ames'  Cas.  432.     As  to  claims  be- 
tween firms  having  a  common  part- 
ner, see  Haines  Estate,  (1896),  176 
Pa.    354,    35    Atl.    237,    Burd.    Cas. 
482;    First    Nat.    Bank    v.    Wood, 
supra;  Bonwit  v.  Heyman,  supra. 

46  See  Somerset  Potters  Works  v. 
Minst  (1852),  10  Gush.   (64  Mass.) 
592;   Ee  Lane    (1874),  2  Low.    (IT. 
S.  D.  C.)   333. 

47  See  Ex  parte  Atkins  (1820),  1 
Buck  479. 

48  See  In  re  Hepburn   (1884),  14 
Q.  B.  Div.  394. 


391 


§§452,453]  LAW  OF  PARTNERSHIP 

§452.  Same  subject — One  partner's  share  cannot  be  reached 
oy  his  creditors  until  partners'  claims  against  firm  are  satis- 
fied.— So,  though  the  share  or  interest  of  one  partner  in  the 
final  surplus  may,  as  has  been  seen,  be  rendered  available  to  his 
creditors,  it  must  be  kept  in  mind  that  that  surplus  is  not  ascer- 
tained until  not  only  the  firm  creditors  as  such  are  paid,  but 
also  not  until  the  claims  of  the  respective  partners  against  the 
firm,  as  for  advances  made  or  money  loaned  to  it,  are  satisfied. 
In  equity,  therefore,  the  individual  creditors  of  one  partner 
cannot  reach  his  share  until  the  claims  of  partners  against  the 
firm  have  been  satisfied.49 

§453.  Same  subject — Individual  creditors  usually  given 
priority  in  individual  assets  of  a  partner. — The  right  of  the 
partnership  creditors  to  priority  of  payment  out  of  the  partner- 
ship assets  being  conceded,  it  has  been  urged  that  the  separate 
creditors  of  the  partner  were  entitled  in  a  judicial  distribution 
of  the  assets  to  a  like  priority  of  payment  out  of  the  separate 
assets  of  the  partner,  and  this  right  has  been  maintained  by 
many,  perhaps  by  a  majority,  of  the  cases  in  the  United  States, 
following  the  early  English  precedents.60  "The  correctness  of 
this  rule,  however,"  it  was  said  in  a  leading  case,61  "has  been 

49  See  Buchan  v.  Sumner  (1847),  H.     584;     Greene     v.     Butterworth 
2  Barb.  Ch.    (N.   Y.)    165,  47  Am.  (1889),  45  N.  J.  Eq.  738,  17  Atl. 
Dee.  305;  Crocker  v.  Crooker  (1863),  949;  Peters  v.  Bain  (1889),  133  U. 
52  Me.  267,  83  Am.  Dee.  509;  Di-  S.  670,  10  Sup.  Ct.  354;  New  Market 
yine  v.  Mitchum  (1844),  4  B.  Mon.  Nat.  Bank  v.  Locke  (1883),  89  Ind. 
(Ky.)    488,  41   Am.   Dec.   241,  Me-  428;   Hawkins  v.   Mahoney   (1898), 
chem's    Gas.    626;    Buck    v.    Winn  71  Minn.  155,  73  N.  W.  720,  Gilm. 
(1850),   11    B.   Mon.    320;    Cain  v.  Cas.  558;   Davis  v.  Howell   (1880), 
Hubble  (1919),  184  Ky.  38,  211  S.  32  N.  J.   Eq.   72,  Burd.   Cas.  438, 
W.  413:  Warren  v.  Taylor   (1877),  Gilm.  Cas.  538. 

60   Ala.   218,   Mechem's   Cas.    1081,          Where  one  partner  who  is  solvent 

Burd.    Cas.    580,     Gilm.     Cas.     446.  seeks  to  recover  a  private  debt  from 

50  See  Rodgers  v.  Meranda  (1857),  the  estate  of  his  insolvent  copartner, 
7  Ohio  St.  180,  Meehem's  Cas.  630,  it  is  no   objection  to  his   doing  so 
Burd.    Cas.    424,    Gilm.    Cas.    528;  that  the  amount  if  recovered  by  him 
Hundley  v.  Farris  (1890),  103  Mo.  will  ultimately  go  through  his  estate 
78,   15   8.   W.   312,   23   Am.   St.  E.  to  the  partnership  creditors;  In  re 
863,    12   L.    B,    A.    254;    Claflin   v.  Head  [1894],  1  Q.  B.  638. 

Behr    (1889),    89    Ala.    503,    8    So.          61  Rodgers  v.  Meranda,  supra. 
45;  Moody  v.  Lucier  (1883),  62  N.          In  Murrill  v,  Neill  (1850),  8  How. 


APPLICATION  OF  PARTNERSHIP  ASSETS  [§  453 

much  controverted,  and  there  has  not  always  been  a  perfect 
concurrence  in  the  reasons  assigned  for  it  by  those  courts  which 
have  adhered  to  it.  By  some,  it  has  been  said  to  be  an  arbitrary 
rule,  established  from  considerations  of  convenience;  by  others, 
that  it  rests  on  the  basis  that  a  primary  liability  attaches  to  the 
fund  on  which  the  credit  was  given — that,  in  contracts  with  a 
partnership,  credit  is  given  on  the  supposed  responsibility  of 
the  firm;  while  in  contracts  with  a  partner  as  an  individual, 
reliance  is  supposed  to  be  placed  on  his  separate  responsibility. 
And  again,  others  have  assigned  as  a  reason  for  the  rule  that 
the  joint  estate  is  supposed  to  be  benefited  to  the  extent  of  every 
credit  which  is  given  to  the  firm,  and  that  the  separate  estate 
is,  in  like  manner,  presumed  to  be  enlarged  by  the  debts  con- 
tracted by  the  individual  partner ;  and  that  there  is  consequently 
a  clear  equity  in  confining  the  creditors,  as  to  preferences,  to 
each  estate  respectively  which  has  been  thus  benefited  by  their 
transactions.  But  these  reasons  are  not  entirely  satisfactory. 
So  important  a  rule  must  have  a  better  foundation  to  stand 
upon  than  mere  considerations  of  convenience;  and  practically 
it  is  undeniable  that  those  who  give  credit  to  a  partnership  look 
to  the  individual  responsibility  of  the  partners  as  well  as  that 

(U.  S.)  414,  12  L.  ed.  1135,  it  is  estate  of  the  partners  with  -whom 
said:  "The  rule  in  equity  govern-  they  have  made  private  and  individ- 
ing  the  administration  of  insolvent  ual  contracts;  and  that  the  private 
partnerships  is  one  of  familiar  ae-  and  individual  property  of  the 
ceptance  and  practice;  it  is  one  partners  shall  not  be  applied  in 
which  will  be  found  to  have  been  in  extinguishment  of  partnership  debts 
practice  in  this  country  from  the  until  the  separate  and  individual 
beginning  of  our  judicial  history,  creditors  of  the  respective  partners 
and  to  have  been  generally  if  not  shall  be  paid.  The  reason  and  foun- 
universally  received.  This  rule,  with  dation  of  this  rule,  or  its  equality 
one  or  two  eccentric  variations  in  and  fairness,  the  court  is  not  called 
the  English  practice  which  may  be  upon  to  justify.  Were  these  less 
noted  hereafter,  is  believed  to  be  obvious  than  they  are,  it  were  enough 
identical  with  that  prevailing  in  to  show  the  early  adoption  and 
England,  and  is  this:  That  part-  general  prevalence  of  this  rule  to 
nership  creditors  shall,  in  the  first  stay  the  hand  of  innovation  at  this 
instance,  be  satisfied  from  the  part-  day,  at  least  under  any  motive  less 
nership  estate;  and  separate  or  priv-  strong  than  the  most  urgent  pro- 
ate  creditors  of  the  individual  part-  priety." 
ners  from  the  separate  and  private 

393 


§  454]  LAW   OP  PARTNERSHIP 

of  the  firm;  and,  also,  those  who  contract  with  a  partner  in  his 
separate  capacity  place  reliance  on  his  various  resources  or 
means,  whether  individual  or  joint.  And  inasmuch  as  individual 
debts  are  often  contracted  to  raise  means  which  are  put  into 
the  business  of  a  partnership,  and  also  partnership  effects  often 
withdrawn  from  the  firm  and  appropriated  to  the  separate  use 
of  the  partners,  it  cannot  be  practically  true  that  the  separate 
estate  has  been  benefited  to  the  extent  of  every  credit  given  to 
each  individual  partner,  nor  that  the  joint  estate  has  retained 
from  the  separate  estate  of  each  partner  the  benefit  of  every 
credit  given  to  the  firm."  The  court,  however,  concluded  that 
the  rule  was  well  established,  saying:  "Some  general  rule  is 
necessary,  and  that  must  rest  on  the  basis  of  the  unalterable 
preference  of  the  partnership  creditors  in  the  joint  effects,  and 
their  further  right  to  some  claim  in  the  separate  property  of 
each  of  the  several  partners.  The  preference,  therefore,  of  the 
individual  creditors  of  a  partner  in  the  distribution  of  his  sep- 
arate estate,  results  as  a  principle  of  equity  from  the  preference 
of  partnership  creditors  in  the  partnership  funds,  and  their 
advantage  in  having  different  funds  to  resort  to,  while  the  indi- 
vidual creditors  have  but  one."  But  whether  the  reasons  as- 
signed to  the  rule  are  satisfactory  or  not,  the  rule  itself  seems 
to  be  established  by  the  clear  weight  of  authority. 

It  is  unqualifiedly  adopted  by  the  Federal  Bankruptcy  Act,52 
and  by  the  Uniform  Partnership  Act,63  as  has  been  seen. 

§  454.  Same  subject — Contrary  views. — But  notwithstanding 
the  quite  general  concurrence  in  the  rule  giving  each  class  of 
creditors  priority  in  the  respective  funds,  it  has  met  with  some 
forcible  dissent,54  and  upon  principle  it  is  difficult  to  sustain  it. 

62  Sec.  5,  subd.  /.  quoted  ante,  v.  Woodruff  (1890),  86  Va.  478,  10 

note  31  §449.  S.  E.  715;  Freeport  Stone  Co.  v. 

53  Sec.  40,  subd.  h.  quoted  ante,  Carey  (1896),^  42  W.  Va.  276,  26  S. 

note  32  §449.  E.  183;  Bardwell  v.  Perry  (1847), 

64 See  Hutzler  v.  Phillips  (1887),  19  Vt.  292,  47  Am.  Dec.  687;  Gue- 

26  S.  C.  136,  1  S.  E.  502,  4  Am.  St.  ringer  v.  Creditors  (1881),  33  La. 

E.  687;  Blair  v.  Black  (1889),  31  Ann.  1279,  (see  also  Miller  v.  N.  O. 

S.  C.  346,  9  S.  E.  1033,  17  Am.  St.  Fertilizer  Co.  (1908),  211  U.  S.  496, 

E.  30,  Mechem'sCas.  644;  Pettyjohn  29  S.  Ct.  176) ;  Camp  v.  Grant 

394 


-APPLICATION  OF  PARTNERSHIP  ASSETS  [§  455 

The  true  rule,  from  the  standpoint  of  principle,  would  seem  to 
be  that  inasmuch  as  each  partner  is  individually  liable  for  the 
partnership  debts,  the  creditors  of  the  firm  (and  therefore  of 
each  partner  as  well)  are  entitled  to  share  equally  with  the 
separate  creditors  in  the  separate  assets  of  the  partners,  at  least 
after  exhausting  the  partnership  assets.  The  basis  of  this 
qualification  is  found  in  the  fact  that  the  partnership  creditor 
has  recourse  to  two  funds  (i.  e.,  the  partnership  assets  and  the 
individual  assets),  while  the  individual  creditor  has  recourse  to 
but  one  fund,  namely,  the  individual  assets ;  and  it  is  a  principle 
of  equity  that  where  one  creditor  has  access  to  two  funds  while 
another  creditor  has  access  to  but  one,  the  former  shall  exhaust 
the  separate  fund  before  resorting  to  the  common  fund.  Having 
done  so,  however,  without  obtaining  payment  in  full,  he  may 
then  resort  to  the  other  fund. 

In  Kentucky  a  modified  application  of  this  principle  is  made 
whereby  when  the  partnership  creditor  claims  priority  in  and 
has  secured  a  percentage  of  his  claim  out  of  the  partnership 
assets,  the  individual  creditor  may  take  a  similar  percentage  out 
of  the  individual  assets;  the  residue  of  the  individual  assets,  if 
any,  will  then  be  distributed  pro  rata  among  the  partnership 
and  the  individual  creditors.55 

§455.  Same  subject — How  where  there  are  individual  but 
no  partnership  assets. — But  either  rule  giving  the  individual 
creditors  a  priority  in  the  individual  assets,  so  far  as  it  rests 
upon  equitable  considerations,  applies  only  where  there  are  two 
funds.  Thus,  where  there  are  individual  assets  but  no  partner- 

(1851),  21   Conn.  41,  54  Am.  Dee.  653;  Hill  v.  Cornwall  (1894),  95  Ky. 

321;      Eobinson     v.     Security     Co.  512,  26  S.  W.  540,  16  Ky.  Law  E. 

(1913),  87  Conn.  268,  87  Atl.  879,  97. 

Ann.  Cas.  1915  C,  1170,  to  the  effect  See     also     Johnson     v.     Gordon 

that  partnership  creditors  may  share  (1897),  102  Oa.  350,  30  S.  E.  507, 

equally  with  individual  creditors  in  showing  that  the  Kentucky  rule  had 

the  separate  assets.  been  adopted  by  the  Georgia  code. 

55  See  Northern  Bank  of  Ky.  v.  Compare     also     Bell     v.     Newman 

Keizer    (1865),  2  Duv.    (Ky.)    169,  (1819),  5  Serg.  &  E.  78,  since  over- 

Mechem's    Cas.    650;    Fayette    Nat.  ruled.    See  discussion  in  Hawkins  v. 

Bank  v.  Kenney  (1880),  79  Ky.  133,  Mahoney,  supra. 
2   Ky.   Law  E.    35,   Mechem's   Cas. 

395 


456] 


LAW  OP  PARTNERSHIP 


ship  assets  and  no  solvent  partner,  it  has  usually  been-  held  that 
the  partnership  creditors  may  share  equally  with  -the  individual 
creditors  in  the  separate  assets,  of  the  partner,  though  there  are 
holdings  to  the  contrary.56 

"Whether  the  partnership  creditors  may  so  share  in  the  indi- 
vidual assets  under  the  provisions  of  the  Federal  Bankruptcy 
Act  has  been  the  subject  of  much  dispute,  but  it  has  now  been 
authoritatively  decided  that  they  may  not.67 

§456.  Same  subject — Firm  cannot  compete  with,  individual 
creditors. — Passing  next  from  the  right  of  partnership  cred- 
itors as  such  to  compete  with  the  individual  creditors  in  the 
separate  estate  of  one  partner,  the  question  arises  whether,  if 
tha*t  partner  was  indebted  to  the  partnership,  the  latter  or  those 
who  represent  it  can,  in  a  judicial  distribution  of  the  assets, 
compete  with  the  individual  creditors  of  that  partner  in  the 


66  See  In  re  Lloyd  (1884),  22  Fed. 
88;  In  re  West  (1889),  39  Fed.  203; 
Harris  v.  Peabody  (1881),  73  Me. 
262,  Mechem's  Gas.  667,  Gilm.  Gas. 
541;  Curtis  v.  Woodward  (1883),  58 
Wis.  499,  17  N.  W.  328,  46  Am.  E. 
647;  Alexander  v.  Gorman  (1886), 
15  E.  I.  421,  7  Atl.  243.  Contra, 
Howe  v.  Lawrence  (1852),  9  Gush. 
(Mass.)  553,  57  Am.  Dec.  68,  Ames' 
Gas.  213;  Warren  v.  Farmer  (1884), 
100  Ind.  593;  In  re  Gray  (1888), 
111  N.  Y.  404;  18  N.  E.  719;  Stew- 
art's Case  (1857),  4  Abb.  Pr.  (N. 
Y.)  408,  Burd.  Gas.  493;  In  re 
Dauchy  (1902),  169  N.  Y.  460,  62 
N.  E.  573.  See  the  case  where  the 
individual  creditor  resorted  to  un- 
usual methods  to  create  a  joint 
fund:  In  re  Marwick  (1845),  2 
Ware  233,  Mechem  's  Gas.  672,  Burd. 
Gas.  445,  Gilm.  Gas.  545. 

Secured  Creditor  —  A  creditor, 
who  also  has  security  for  the  claim, 
may,  in  equity,  by  what  seems  the 
weight  «f  authority,  prove  for  the 


entire  amount  of  his  claim,  and  not 
simply  for  the  amount  after  de- 
ducting the  value  of  the  security — 
though,  of  course,  he  can  not  re- 
tain more  than  the  full  amount  of 
his  claim  from  all  sources;  in  bank- 
ruptcy, on  the  other  hand,  he  must 
deduct  the  value  of  his  security. 
See  Merrill  v.  National  Bank 
(1898),  173  TJ.  S.  131,  19  Sup.  Ct. 
360,  43  L.  ed.  640;  Aldrieh  v.  Chem- 
ical Nat.  Bank  (1900),  176  U.  S. 
618,  20  Sup.  Ct.  498,  44  L.  ed.  611 ; 
Tebbetts  v.  Eollins  (1906),  192 
Mass.  169,  78  N.  E.  299;  Bank 
Commissioners  v.  Trust  Co.  (1901), 
70  N.  H.  536,  49  Atl.  113;  People 
v.  Eemington  (1890),  121  N.  Y. 
328,  24  N.  E.  793,  8  L.  E.  A.  458, 
Burd.  Gas.  442;  Allen  v.  Danielson 
(1887),  15  E.  I.  480,  8  Atl.  705, 
Gilm.  Gas.  564. 

57  See  Farmers  Bank  v.  Eidge 
Ave.  Bank  (1915),  240  U.  S.  498, 
26  S.  Ct.  461. 


396 


f  APPLICATION  OF   PARTNERSHIP   ASSETS      [§§457,458 

distribution  of  his  assets.  As  to  this,  the  general  rule  is  that  the 
partnership  or  those  who  represent  it  cannot  be  permitted  to 
compete  with  the  separate  creditors  of  one  partner  in  the  dis- 
tribution of  his  estate.68 

An  exception  to  the  rule  has  been  made  where  the  claim  of 
the  partnership  against  the  partner  is  founded  upon  his  wrong- 
ful and  fraudulent  appropriation  of  firm  assets  to  his  own  use.69 

Although  the  Uniform  Partnership  Act  seems  to  be  opposed,60 
it  has  usually  been  held  that  a  surviving  partner  who  has  paid 
the  partnership  debts  may,  as  to  any  deficiency  left  after  apply- 
ing the  partnership  assets,  have  a  personal  claim  for  a  pro  rota 
part  against  the  estate  of  the  deceased  partner,  upon  which  he 
may  share  pari  passu  with  the  individual  creditors.61 

§  457.  Partner  competing1  with  partnership  creditors  in 

individual  assets. — "Where  the  partnership  creditors  may  reach 
the  separate  estate  of  one  partner  (as  where  he  has  no  individual 
creditors,  etc.)  another  partner  who  has  a  claim  against  that 
partner  may  not  compete  with  the  partnership  creditors.62  But 
if  his  claim  were  a  negotiable  one,  his  'bona  fide  transferee  for 
value  might  compete,  and  if  there  had  been  a  novation  a  trans- 
feree could  compete  although  the  claim  were  not  negotiable. 

§458.  — — Obtaining  claims  against  both  estates  by  con- 
tract.— While  it  is  thus  generally  true  that  the  joint  and  the 

58  See  Bead  v.  Bailey   (1877),  3  Gas.      569;      McElroy     v.     Allfree 

App.  Gas.  94,  Ames'  Gas.  409;  In  (1906),   131  Iowa  518,  108  N.  W. 

re    Hamilton    (1880),   1    Fed.    800;  119,  Gilm.  Gas.  573. 

Cowan     v.     Gill     (1883),     11     Lea  60 See  Sec.  40  (i). 

(Tenn.),     674;     Lodge     v.     Feudal  61  See  Olleman  v.  Reagan  (1867), 

(1790),    1    Vesey,    Jr.    166,    Ames'  28  Ind.  109;  In  re  Euby  (1896),  24 

Gas.    394.      Contra,    Bird    v.    Bird  Ont.  App.  509;  Payne  v.  Matthews 

(1885),  77  Me.  499,  1  Atl.  455.  (1836),  6  Paige  (N.  Y.  Ch.)  19,  29 

This  rule  seems  not  to  be  altered  Am.  Dee.  738;    [contra  is  Kirby  v. 

by  the  Bankruptcy  Act,  §  5  g.     See  Carpenter  (1849),  7  Barb.   (N.  Y.) 

In.  re  Telfer   (1910),  106  C.  C.  A.  373];    Morris  v.  Morris    (1848),   4 

366,  184  Fed.  224;   In  re  Effinger  Gratt.  (Va.)  293;  In  re  Dell  (1878), 

(1910),  184  Fed.  728.  5  Saw.    (U.   S.  D.  C.)    344,  Ames' 

89  See  Eead  v.  Bailey,  supra;  Ex  Gas.  419. 

parte    Sillitoe    (1824),    1    Glyn    &  62  See  Ex  parte  Topping  (1864), 

Jameson,  374,  Ames'  Gas.  428?  Gilm.  4  De  Gex.  J.  &  S.  551,  Ames'  Gas, 

397 


§  459]  LAW   OF  PARTNERSHIP 

separate  assets  are  reserved  for  creditors  of  their  respective 
class,  it  is  possible  that  a  creditor  may  have  secured  both  a  part- 
nership and  an  individual  obligation  which  will  entitle  him  to 
prove  his  claim  against  both  the  partnership  and  the  individual 
estates.  Thus  it  has  been  held,  though  there  are  also  cases  to 
the  contrary,  that  a  creditor  holding  a  partnership  note  sep- 
arately endorsed  by  one  partner  may,  in  case  of  insolvency, 
prove  against  both  estates.63  '  A  mere  joint  and  several  claim 
would  be  more  questionable,64  and  if  the  obligation  were  really 
a  partnership  one  only,  although  signed  in  the  individual  names 
of  the  partners  instead  of  in  the  firm  name,  it  would  be  treated 
accordingly.66 

§459.  Application  of  assets  when  there  was  no  ostensible 
partnership — When  there  was  merely  an  ostensible  but  not  an 
actual  partnership. — Questions  as  to  the  proper  application  of 
the  assets  also  arise  where  there  was  really  a  partnership  between 
the  parties,  but  there  was  none  ostensibly,  as  where,  of  two  part- 
ners, one  was  dormant  and  the  other  appeared  to  the  public  as 

473,   Gilm.   Gas.   576;    In  re   Head  ette  Nat.  Bank  v.  Kenney   (1880), 

(1894),  1  Q.  B.  638.  79  Ky.  133,  2  Ky.  Law  B.  35,  Me- 

63  See   In   re   Farmim    (1843),   8  chem's  Gas.   653;    Hill  v.   Cornwall 

Fed.     Gas.    1057;     In    re    Bradley  (1894),  95  Ky.  512,  26  8.  W.  540, 

(1871),  2  Biss.  515;   In  re  Adams  16  Ky.  Law  E.  97,  Burd.  Gas.  474. 

(1887),  29  Fed.  843;  Williams  Nat.  Compare  In  re  Barnard  (1886),  32 

Bank  v.  Hall  (1893),  160  Mass.  171,  Ch.  Div.  447. 

35    N.    E.    666,    Burd.    Gas.    473;  64  Under  present  Bankruptcy  Act, 

Fowlkes  v.  Bowers  (1883),  79  Tenn.  held,  not  permissible:     In  re  Hosier 

(11  Lea)  144;  Union  Nat.  Bank  v.  (1901),  112  Fed.  138.     Under  state 

Bank  of  Commerce    (1880),  94  111.  insolvency  statutes,  permitted  in  Ex 

271;    Winslow   v.    Wallace    (1888),  parte   Nason    (1880),    70   Me.    363. 

116  Ind.  317,  17  N.  E.  923,  1  L.  E.  Compare  Ex  parte  First  Nat.  Bank, 

A.   179,  Mechem's  Gas.   658;    Haw-  id.  369.     On  tort  claim  permitted: 

kins  v.  Mahoney   (1898),  71  Minn.  Matter  of  Peck   (1912),  206  N.  Y. 

155,    73    N.    W.    720;    In  re   Gray  55,  99  N.  E.  258,  41  L.  E.  A.   (N. 

(1888),    111   N.   Y.  404,   18   N.  E.  S.)  1223,  Ann.  Gas.  1914  A  798. 

719;    Eeed    v.    Bacon    (1900),    175  65  See     Adams     v.     Lumber     Co. 

Mass.  407,  56  N.  E.  716;  Anderson  (1912),  120  C.  C.  A.  302,  202  Fed. 

v.  Stayton  Bank    (1916),   82   Oreg.  48. 
357,  159  Pac.  1033.     Contra:  Fay- 

398 


APPLICATION  OF  PARTNERSHIP  ASSETS  [§  460 

the  sole  dealer.  "In  such  a  case,"  say  the  court  in  Tennessee,66 
"the  ordinary  rule  touching  partnership  transactions  and  part- 
nership property  do  not  apply.  The  dormant  partner  has  clearly 
no  equity  to  require  the  application  of  the  partnership  property 
to  the  payment  of  the  firm  debts  to  his  exoneration,  as  against 
the  creditors  of  the  ostensible  partner  who  has  been  dealt  with 
as  the  sole  owner.67  And  the  creditors  of  the  firm,  who  have  no 
equity  except  such  as  can  be  worked  out  through  the  dormant 
partner,  cannot  require  that  the  partnership  property  be  first 
applied  to  the  satisfaction  of  their  debts.68  It  is  a  race  of  dili- 
gence between  the  two  classes  of  creditors,  and  equity  will  not 
interfere  to  deprive  either  of  a  legal  advantage." 

§  460.  The  reverse  of  this  case  also  arises,  as  where  two 

persons  are  ostensibly  partners,  but  are  not  really  such.  The 
rule  properly  to  be  applied  here,  as  declared  in  a  recent  case  in 
Wisconsin,69  is,  "that  if  a  person  allows  another  to  carry  on 
business  in  such  a  way  as  to  amount  to  a  holding  out  to  persons 
generally  that  he  and  such  other  are  partners,  and  credit  is 
given  to  both  on  the  supposition  that  they  are  partners  in  fact, 
the  property  with  which  such  business  is  carried  on,  though  in 
law  that  of  such  person,  in  equity  will  be  treated  as  the  joint 
property  of  such  person  and  such  other;  and  neither  of  them, 
nor  the  creditors  of  either,  can  prove  up  in  insolvency  in  com- 

66  Whitworth  v.  Patterson  (1880),  (1891),  87  Mich.  599,  49  N.  W.  872, 
6  Lea  119.  24  Am.  St.  E.  182;   Kelly  v.  Scott 

67  Cammack  v.  Johnson  (1839),  2  (1872),  49  N.  Y.  595,  Meehem's  Gas. 
N.  J.  Eq.  163.  682;    Elliot  v.   Stevens    (1859),    38 

68  French  v.  Chase  (1829),  6  Me.  N.  H.  311;  Taylor  v.  Wilson  (1878), 
166,  Mechem's   Gas.  1069;   Lord  v.  58  N.  H.  465,  Burd.  Gas.  112;  Cod- 
Baldwin    (1828),    6   Pick.    (Mass.)  ville  Co.  v.  Smart  (1907),  15  Ont. 
348.  L.  R.  357.     See,  also,  Adams  v.  Al- 

69  Thayer    v.    Humphrey    (1895),  bert  (1898),  155  N.  Y.  356,  49  N.  E. 
91  Wis.  276,  64  N.  W.  1007,  30  L.  929,  63  Am.  St.  E.  675.    Under  the 
E.  A.  549,  51  Am.  St.  E.  887,  Burd.  English    Bankruptcy    Act,    dealing 
Cas.   117,  Gilm.  Gas.  546;   Gibbs  v.  with  goods  of  which  the  partnership 
Humphrey   (1895),  91  Wis.  Ill,  64  had  the  "reputed  ownership,"  see 
N.  W.  750,  Burd.  Cas.  475.    To  same  Ex  parte  Hayman  (1878),  8  Ch.  Div. 
effect:     Van     Kleeck     v.     McCabe  11. 

399 


§  461]  LAW  OF  PARTNERSHIP 

petition  with  the  creditors  who  have  trusted  the  two  as  partners 
and  the  business  as  that  of  the  two." 

On  the  other  hand,  this  conclusion  has  been  vigorously  de- 
nied,70 upon  the  ground  that  the  effect  of  estoppels  is  personal 
only,  and  does  not  affect  the  property;  the  person  estopped  is 
not  in  fact  a  partner  and  has  no  lien  or  other  claim  upon  the 
partnership  assets  through  which  the  creditors  of  the  supposed 
partnership  can  reach  them.  The  draftsmen  of  the  Uniform 
Partnership  Act  express  the  belief  that  this  latter  conclusion  is 
required  by  the  language  of  Section  16.  1&,  but  this  may  well 
be  thought  doubtful. 

§461.  Application  of  assets  of  firms  having  one  or  more 
partners  in  common. — "Where  there  are  two  or  more  firms 
having  some  but  not  all  of  their  partners  in  common,  the  assets 
of  the  several  firms  must  usually  be  regarded  as  distinct  groups.71 
"Where  the  membership  was  identical,  then  if  it  is  properly  to  be 
regarded  as  a  single  partnership  with  branches,  all  of  the  assets 
are  to  be  administered  as  a  unit.72  But  if  each  was  in  fact  a 
distinct  and  independent  venture,  then,  though  the  partners  were 
identical,  the  various  groups  of  assets  are,  it  is  said,  to  be  ad- 
ministered as  those  of  separate  firms.73 

But,  in  accordance  with  a  principle  already  referred  to,  it  is 
held  that  an  insolvent  partnership  composed  of  three  of  the  four 
members  of  a  second  insolvent  partnership  cannot  compete,  as 
a  creditor  of  the  latter,  with  its  other  creditors  in  the  distribu- 
tion of  its  assets.74 

70  See    Broadway    Nat.    Bank    v.  Bank  v.  Burt  (1883),  93  N.  Y.  233. 
Wood  (1896),  165  Mass.  312,  43  N.  78 See  In  re  Vetterlein  (1890),  44 
E.   100,  Mechem's  Gas.   688,  Burd.  Fed.    57;     (Cf.    In    re    Vetterlein 
Cas.  129;  Bixler  v.  Kresge  (1895),  (1871),  5  Ben.   (U.  S.  D.  C.)   311, 
169  Pa.  405,  32  Atl.  414,  47  Am.  St.  Burd.  Cas.  276) ;  Campbell  v.  Colo. 
E.  920,  Burd.  Cas.   115.     Compare  C.  &  I.  Co.   (1885),  9  Colo.  60,  10 
Swann  v.  Sanborn  (1878),  4  Woods  Pac.   248. 

625,  Gilm.  Cas.  557.  78  See   Gay   v.   Bay    (1907),   195 

71  See    Lewis    v.    United     States      Mass.  8,  80  N.  E.  693. 

(1875),  92  U.  S.  618,  23  L.  ed.  513;  74  See   ante,    §451;    McCruden  v. 

Bullock  v.  Hubbard  (1863),  23  Cal.  Jonas  (1896),  173  Pa.  507,  34  Atl. 

495,     83     Am.     Dee.     130;     Haines  224,  51  Am.  St.  E.  774,  Burd.  Cas. 

Estate  (1896),  176  Pa.  354,  35  Atl.  47S. 
237,   Burd.    Cas.  482;    Second   Nat. 

400 


APPLICATION  OP  PARTNERSHIP  ASSETS      [§§462,463 

In  bankruptcy,  one  of  such  firms  has  been  permitted  to  prove 
as  a  creditor  against  the  other.75 

§  462.  Application  of  assets  where  there  are  successive  firms 
— Uniform  Partnership  Act. — The  problem  of  the  proper  dis- 
tribution of  a  body  of  assets  where,  owing  to  changes  of  mem- 
bership, several  really  different  firms  have  carried  on  business 
in  succession  with  substantially  the  same  stock  or  property,  is 
often  an  exceedingly  complicated  and  difficult  one.  Theoreti- 
cally, the  assets  of  each  firm  are  to  be  applied  to  the  indebtedness 
of  that  firm.  Each  successive  firm  may  have  assumed  the  in- 
debtedness of  the  preceding  firm,  but  that  will  not  always  be 
true.  A  new  partner  may  have  come  into  or  a  former  partner 
may  have  gone  out  of  an  existing  partnership,  without  any 
assumption  or  adjustment  of  the  existing  debts,  and  the  new 
partnership  may  immediately  incur  fresh  indebtedness.  The 
whole  subject  is  now  very  much  in  confusion  and  uncertainty. 

The  Uniform  Partnership  Act  proposes,  in  general,  to  regard 
all  of  the  creditors  at  the  various  stages  as  creditors  of  the  busi- 
ness at  any  stage,  where  the  business  is  in  fact  continuous  not- 
withstanding the  changes  in  the  personnel  of  the  members.  It 
provides  for  the  rights  of  creditors  when  a  new  partner  is  ad- 
mitted, or  a  partner  retires,  is  expelled  or  dies,  but  the  business 
is  continued  without  liquidation  of  the  debts  of  the  partnership 
dissolved  by  this  change  in  personnel.  The  provisions  are  too 
long  for  reproduction  in  the  text,  but  will  be  found  in  full  in 
Sections  41,  42  and  43,  in  the  Appendix. 

§463.  Equitable  rules  do  not  defeat  legal  priorities. — The 

rules  of  distribution  prevailing  in  courts  of  equity  by  which  the 
individual  creditors  get  priority  in  the  individual  assets  do  not 
usually  operate  to  defeat  priorities  previously  acquired  therein 
by  the  partnership  creditors  in  legal  proceedings.  Thus,  it  has 
been  held  that  the  lien  of  a  judgment,  rendered  after  the  death 
of  one  partner,  but  for  a  partnership  debt,  and  attaching  to  the 
individual  real  estate  of  the  surviving  partner,  will  not  be  dis- 

75  See  In  re  Buckhouse  (1874),  2 
Lowell  331,  Gilm.  Gas.  572. 

Mech.  Part.— 26  401 


463] 


LAW  OF  PARTNERSHIP 


turbed  in  favor  of  a  later  judgment  against  such  survivor  for 
his  individual  debt,  even  though  such  later  judgment  cannot 
otherwise  be  satisfied,  and  it  was  alleged  that  the  prior  one  might 
have  been  satisfied  out  of  the  estate  of  the  deceased  partner.76 
Selden,  J.,  after  referring  to  the  rule  prevailing  in  courts  of 
equity,  as  already  noticed,  said :  ' '  This,  however,  is  a  rule  which 
prevails  in  courts  of  equity  in  the  distribution  of  equitable 
assets  only.  Those  courts  have  never  assumed  to  exercise  the 
power  of  setting  aside,  or  in  any  way  interfering  with,  an  abso- 
lute right  of  priority  obtained  at  law.  In  regard  to  all  such  cases 
the  rule  is,  Equitas  sequitur  leg  em." 

So  where  the  individual  credits  of  one  partner  had  been  at- 
tached at  the  suit  of  the  firm  creditors  and  were  subsequently 
attached  by  his  individual  creditor,  it  was  held  that  the  prior 
lien  was  effectual.77  The  court  said  that  it  was  settled  law  in 
Massachusetts,  [as  it  is  generally],  though  otherwise  in  New 
Hampshire,  that ' '  in  a  suit  against  two  or  more  copartners  upon 
their  joint  debt,  the  separate  property  of  any  one  of  the  partners 
may  be  attached,  and  the  lien  so  acquired  is  not  discharged  or 
impaired  by  a  subsequent  attachment  of  the  same  property  upon 
a  suit  in  favor  of  a  separate  creditor  of  the  same  partner." 


76Meech  v.  Allen  (1858),  17  N. 
Y.  300,  72  Am.  Dec.  465,  Mechem's 
Gas.  677,  Ames'  Gas.  326,  Gihn. 
Gas.  499;  In  re  Sandusky  (1878), 
17  Nat.  Bankr.  Reg.  452,  Fed.  Gas. 
No.  12,308,  Burd.  Gas.  421. 


77  Stevens  v.  Perry  (1873),  113 
Mass.  380,  Mechem's  Gas.  961, 
Ames'  Gas.  330,  Burd.  Gas.  377.  To 
like  effect:  Allen  v.  Wells  (1839), 
22  Pick.  (Mass.)  450,  33  Am.  Dec. 
757. 


402 


CHAPTER  XXI. 

OF  THE  FINAL  ACCOUNTING. 

§464.  Necessity  of  accounting.  §§469,  470.  Manner  of  accounting. 

465.  Basis   of  the  accounting.  471.  Uniform          Partnership 

466,467.  Eight      of      general  Act. 

creditors    to    present    their         472,  473.  Loss  of  capital,  how 

demands.  borne. 

468.  Partnership  debts  to  be  first  474.  Opening     and     restating    ac- 

paid.  counts. 

§464.  Necessity  of  accounting. — Upon  the  termination  of 
the  partnership,  either  by  the  act  of  the  parties  or  the  operation 
of  law,  an  accounting  usually  becomes  necessary.  If  the  part- 
nership is  solvent,  and  the  partners  agree,  they  may  close  up 
their  affairs,  pay  their  debts  and  distribute  the  surplus,  by  their 
own  act;  but  if  they  cannot  agree,  or  if  the  partnership  is  in- 
solvent and  there  are  conflicting  claims,  an  accounting  in  court 
becomes  necessary.  As  has  been  already  seen,1  the  court  of 
equity  is  the  forum  in  which  partnership  accounts  are  to  be 
settled,  and  something  has  been  already  said  as  to  who  is  entitled 
to  demand  an  accounting.2  It  has  been  sometimes  said  that  the 
right  to  demand  an  accounting  is  a  test  of  being  a  partner,  but 
the  true  theory  seems  to  be  that  the  right  to  an  accounting  fol- 
lows because  one  is  a  partner. 

§  465.  Basis  of  the  accounting. — It  has  been  seen  3  that  it  is 
the  duty  of  each  partner  to  keep  full  and  accurate  accounts  of 
his  partnership  transactions,  and  that  if  he  fails  to  do  so,  every 
uncertainty  resulting  therefrom  will  ordinarily  be  resolved 
against  him.  It  has  been  seen  also*  that  all  profits  and  ad- 
vantages resulting  from  partnership  transactions  must  be 
accounted  for,  even  though  done  in  the  name  of  one  partner 

1  Ante,  §  227.  8  See  ante,  §  175. 

2  Ante,  §230.  *Ante,  §170. 

403 


§§466,467]  LAW  OF  PARTNERSHIP 

only ;  and  that  a  partner  is  not  ordinarily  entitled  to  extra  com- 
pensation or  interest  in  the  absence  of  an  agreement  to  pay  it.5 
It  has  been  seen,  moreover,  that  the  claims  of  partners  for  con- 
tribution as  to  debts  paid,  for  reimbursement  for  advances,  for 
indemnity  against  liability,  and  most  other  claims  and  demands 
arising  between  the  partners  themselves,  are  to  be  settled  upon 
the  final  accounting.6  Such  an  accounting  becomes,  therefore, 
the  one  great  occasion  for  a  comprehensive  and  effective  settle- 
ment of  partnership  demands,  between  the  partners. 

§  466.  Same  subject — Right  of  general  creditors  to  present 
their  demands.  —  But  the  claims  of  the  partners  as  between 
themselves  are  usually  not  the  only  ones  to  be  adjusted.  The 
claims  of  the  partnership  creditors  must  also  be  ascertained  and 
paid.  These  may  be  cared  for  by  the  voluntary  action  of  the 
partners  without  suit.  If  no  court  has  acquired  control  of  the 
assets  for  the  purpose  of  distribution,  ordinary  actions  at  law 
can  usually  be  maintained  notwithstanding  the  termination  of 
the  partnership.  Or  in  an  action  in  equity  instituted  by  a  part- 
ner or  a  creditor  to  wind  up  the  business  and  distribute  the 
assets,  the  claims  of  the  partnership  creditors  may  be  presented 
and  proved  without  the  commencement  of  separate  actions  to 
enforce  them. 

Debts  must  be  collected  either  by  the  partners  themselves,  or 
by  a  receiver  in  case  the  partnership  affairs  are  being  settled  by 
a  court  of  equity.  A  sale  of  the  tangible  property  is  also  to  be 
made,  and  is  practically  a  matter  of  course,  unless  for  special 
reason  shown,  some  other  method  of  disposition  is  ordered. 

When  the  assets  have  thus  been  reduced  to  an  available  and 
distributable  form,  and  the  claims  of  the  partners  among  them- 
selves and  of  creditors  against  the  firm  have  been  ascertained, 
the  estate  is  ready  for  distribution  among  those  entitled  accord- 
ing to  the  priorities  which  the  law  establishes. 

§  467.  As  has  been  already  seen  in  a  previous  section,7 

the  partners  themselves  may,  in  pursuance  of  well-settled  and 

5  Ante,  §§178,  179.  ?See  ante,  §227. 

6  Ante,  §  190. 

404 


FINAL  ACCOUNTING  [§§468,469 

long-established  rules,  have  the  aid  of  courts  of  equity  in  securing 
accountings,  dissolutions  and  distributions  of  the  partnership  as- 
sets. Other  persons  who  claim  through  the  partners  may  also  of- 
ten have  such  aid  to  secure  an  accounting  and  distribution.  The 
mere  general  creditor  does  not  usually  need  such  aid,  as  he  may 
reach  the  assets  through  ordinary  legal  process.  But  at  times  a 
creditor  who  has  exhausted  his  legal  remedies  may  have  recourse 
to  equitable  ones,  like  a  creditor's  bill,  for  example.  Moreover, 
in  many  states,  there  are  statutory  proceedings,  such  as  state 
insolvency  proceedings  for  example,  by  means  of  which  he  may 
bring  the  assets  under  judicial  control;  and,  during  the  exist- 
ence of  a  national  bankruptcy  law,  he  may  have  the  remedies 
which  such  a  statute  provides.  The  consideration  of  the  appli- 
cation of  these  remedies,  however,  is  not  within  the  scope  of  the 
present  work. 

§468.  Partnership  debts  to  be  first  paid. — It  follows  from 
what  has  been  said  as  to  the  application  of  the  firm  assets  8  that 
the  partnership  debts  are  to  be  paid  first,  and  that  claims  of 
the  individual  partners  against  the  firm  or  each  other  cannot 
compete  with  the  claims  of  the  firm  creditors.  It  is  thus  said 
to  be  a  general  rule  that  by  no  form  of  claim  can  one  partner 
compete  with  the  firm  creditors  in  the  distribution  of  the  firm 
assets ; 9  but  this  is  a  question  which  has  been  considered  in  the 
preceding  chapter. 

§469.  Manner  of  accounting. — Mr.  Justice  Lindley  lays 
down  the  following  rules,10  which  have  been  generally  adopted, 
as  to  the  manner  of  accounting:  "In  adjusting  the  accounts  of 

8  See  ante,  §  449.  The  partners  may,  of  course,  by 

9  See  Edison  Illuminating   Co.   v.  agreement  vary  these   rules  so  far 
DeMott  (1893),  51  N.  J.  Eq.  16,  25  as    they    affect    themselves    alone: 
Atl.  952;  Ex  parte  Blythe   (1881),  Groth  v.  Kersting  (1896),  23  Colo. 
16  Ch.  Div.  620.  213,  47  Pac.   393,   Burd.   Gas.   563, 

102  Lindley  on  Partnership,  402      Gilm.  Gas.  484;   Huger  v.  Cunning- 
(Ewell's  2d  Am.  ed.).     See,  also,      ham  (1906),  126  Ga.  684,  56  S.  E. 
Molineaux  v.   Eaynolds    (1896),   54      64. 
N.  J.  Eq.   559,  35  AtL   536,  Burd. 
Gas.  169. 

405 


§  470]  LAW  OP  PARTNERSHIP 

partners,  losses  ought  to  be  paid  first  out  of  assets  excluding 
capital,  next  out  of  capital,  and  lastly  by  having  recourse  to 
the  partners  individually;  and  the  assets  of  the  partnership 
should  be  applied  as  follows: 

"1.  In  paying  the  debts  and  liabilities  of  the  firm  to  non- 
partners. 

"2.  In  paying  to  each  partner  ratably  what  is  due  from  the 
firm  to  him  for  advances  as  distinguished  from  capital.11 

"3.  In  paying  to  each  partner  ratably  what  is  due  from  the 
firm  to  him  in  respect  of  capital. 

"4.  The  ultimate  residue,  if  any,  will  then  be  divisible  as 
profit  between  the  partners  in  equal  shares,  unless  the  contrary 
be  shown. ' ' 18 

§470.  Same  subject — "If  the  assets  are  not  sufficient  to  pay 
the  debts  and  liabilities  to  non-partners,"  continues  Mr.  Justice 
Lindley,  "the  partners  must  treat  the  difference  as  a  loss  and 
make  it  up  by  contributions  inter  se.  If  the  assets  are  more 
than  sufficient  to  pay  the  debts  and  liabilities  of  the  partnership 
to  non-partners,  but  are  not  sufficient  to  repay  the  partners  their 
respective  advances,  the  amount  of  unpaid  advances  ought,  it 
is  conceived,  to  be  treated  as  a  loss  to  be  met  like  other  losses. 
In  such  a  case  the  advances  ought  to  be  treated  as  a  debt  of  the 
firm,  but  payable  to  one  of  the  partners  instead  of  to  a  stranger. 
If,  after  paying  all  the  debts  and  liabilities  of  the  firm  and  the 
advances  of  the  partners,  there  is  still  a  surplus,  but  not  suffi- 

11  This  must  be  secured  to  him  be-  Folsom  v.  Marlette  (1897),  23  Nev. 
fore  a  distribution  of  capital  among  459,  49  Pae.  39,  Burd.  Gas.  570. 
the  other  partners.  It  is  a  violation  12  As  has  been-  already  seen,  ante, 
of  this  right  to  distribute  the  capi-  §  145,  it  is  the  general  rule  that,  in 
tal  and  give  him  merely  a  judgment  the  absence  of  some  agreement  to 
to  collect  his  advances  from  the  the  contrary,  profits  and  losses  are 
other  partners  pro  rata.  See  Leser-  to  be  shared  equally  among  the  part- 
man  v.  Bernheimer  (1889),  113  N.  ners,  even  although  their  respective 
Y.  39,  20  N.  E.  869,  Mechem's  Gas.  contributions  to  the  capital  were  un- 
1072,  Burd.  Gas.  565.  It  will  take  equal.  See  Raymond  v.  Putnam 
precedence  of  a  mortgage  upon  one  (1862),  44  N.  H.  160,  Gilm.  Gas. 
partner's  interest:  Warren  v.  Tay-  490.  See,  also,  McMurtrie  v.  Guiler 
lor  (1877),  60  Ala.  218,  Mechem's  (1903),  183  Mass.  451,  67  N.  E.  358, 
Cas.  1081,  Burd.  Gas.  580.  See,  also,  Gilm.  Gas.  74. 

40G 


FINAL   ACCOUNTING  [§§471,472 

cient  to  pay  each  partner  his  capital,  the  balances  of  capitals 
remaining  unpaid  must  be  treated  as  so  many  losses,  to  be  met 
like  other  losses. ' ' 

§471.  Uniform  Partnership  Act. — The  Uniform  Part- 
nership Act  contains  detailed  provisions  upon  this  subject,  which 
are  in  substantial  conformity  with  those  mentioned  in  the  pre- 
ceding section  as  to  the  order  of  application.  It  also  contains 
other  provisions  which  need  not  be  repeated  here.  (Section  40.) 
The  complete  text  is  given  in  the  Appendix. 

§472.  Same  subject — Loss  of  capital,  how  borne. — "In  the 

absence  of  controlling  agreement,"  said  the  court  in  .a  leading 
case,13  "partners  must  bear  the  losses  in  the  same  proportion 
as  the  profits  of  the  partnership,  even  if  one  contributes  the 
whole  capital  and  the  other  nothing  but  his  labor  or  services. 
Whether  a  loss  of  capital  is  a  partnership  loss,  to  be  borne  by 
all  the  partners,  depends  upon  the  nature  and  extent  of  the 
contract  of  partnership. 

"If,  as  is  not  infrequently  the  case  in  a  partnership  for  a 
single  adventure,  the  mere  use  of  the  capital  is  contributed  by 
one  partner,  and  the  partnership  is  in  the  profits  and  losses 
only,  the  capital  remains  the  property  of  the  individual  partner 
to  whom  it  originally  belonged,  any  loss  or  destruction  of  it 
falls  upon  him  as  the  owner,  and,  as  it  never  becomes  the  prop- 
erty of  the  partnership,  the  partnership  owes  him  nothing  in 
consideration  thereof.14 

ISWhiteomb  v.   Converse    (1875),  Cameron  v.  Watson  (1858),  10  Rich. 

119    Mass.    38,    20    Am.    Eep.    311,  (S.    Car.)    Eq.    64,    103;    Baker    v. 

Mechem's  Gas.  692,  Burd.  Gas.  575,  Safe   Deposit    Co.    (1900),    90    Md. 

Gilm.    Gas.    488.      See,    also,    Taf t  744,  45  Atl.  1028,  78  Am.  St.  E.  463 ; 

v.    Schwamb    (1875),    80    111.    289,  Manley  v.  Taylor  (1884),  50  N.  Y. 

Burd.  Gas.  577.     Compare  Magilton  Super.     26;     Hasbrouck    v.     Childs 

v.   Stevenson    (1896),   173  Pa.   560,  (1858),  16  N.  Y.  Super.  (3  Bosw.) 

34  Atl.  235,  Burd.  Gas.  573.  105;    Everly  v.   Durborrow    (1871), 

14  [For  a  later   case  holding  the  8  Phila.  93,   [but  compare  Emerick 

particular  partnership  to  be  on  this  v.  Moir  (1889),  124  Pa.  498,  17  Atl. 

basis,     see     Meadows     v*.     Mocquot  1] ;    Stumph    v.    Bauer    (1881),    73 

(1901),  110  Ey.  220,  61  S.  W.  28,  lud.  157,  Gilm.  Gas.  175. 
22   Ky.   Law  E.   1646.V      See,  also, 

407 


§  473]  LAW   OP   PARTNERSHIP 

"But  where,  as  is  usual  in  an  ordinary  mercantile  partner- 
ship, a  partnership  is  created  not  merely  in  profits  and  losses, 
but  in  the  property  itself,  the  property  is  transferred  from  the 
original  owners  to  the  partnership  and  becomes  the  joint  prop- 
erty of  the  latter ;  a  corresponding  obligation  arises  on  the  part 
of  the  partnership  to  pay  the  value  thereof  to  the  individuals 
^who  originally  contributed  it;  such  payment  cannot,  indeed,  be 
demanded  during  the  continuance  of  the  partnership,  nor  are 
the  contributors,  in  the  absence  of  agreement  or  usage,  entitled 
to  interest;  but,  if  the  assets  of  the  partnership  upon  a  final 
settlement  are  insufficient  to  satisfy  this  obligation,  all  the  part- 
ners must  bear  it  in  the  same  proportion  as  other  debts  of  the 
partnership." 

§473.  Same  subject. — In  accordance  with  these  principles, 
it  has  been  held  that,  where  one  partner  contributes  experience, 
skill,  or  the  like,  and  the  other  money,  the  former  is  not,  upon 
dissolution,  entitled  to  any  part  of  the  cash  capital,  but  each 
takes  back,  so  far  as  possible,  what  he  put  in — one  his  experi- 
ence, etc.,  and  the  other  his  money.16  If,  however,  where  one 
contributes  labor  and  the  other  money  [not  merely  its  use], 
there  is,  upon  dissolution,  a  loss  of  capital,  it  has  been  held 
that  the  one  who  contributed  labor  only  must  aid  in  making 
good  the  loss  of  the  other  who  contributed  money,16  though  there 
are  cases  which  hold  the  contrary.17 

In  making  contribution  at  law,  the  loss  is  divided  equally 
among  the  whole  number,  without  regard  to  their  solvency  or 
insolvency ;  but  in  equity  the  loss  is  made  to  rest  upon  the  solvent 
partners  alone.18  The  Uniform  Partnership  Act  adopts  the 
equity  rule.19 

15  Shea    v.    Donahue    (1885),    15  17  See  Baker  v.  Safe  Deposit  Co., 

Lea  (Term.),  160,  54  Am.  Bep.  407,  supra;  Meadows  v.  Mocquot,  supra; 

Mechem's  Cas.  695,  Gilm.  Cas.  168;  and  other  cases  cited  in  preceding 

Conroy     v.     Campbell     (1879),     13  section. 

Jones  &  Sp.  (N.  Y.)  326.  ISWhitcomb   v.    Converse,   supra; 

ISWhitcomb   v.   Converse,  supra;  1  Lindley  on  Partnership    (Ewell's 

Hayes  v.   Hayes    (1889),  66  N.   H.  2d  Am.  ed.),  376. 

134,  19  Atl.  571.  19  Sec.  40  (d). 

408 


FINAL  ACCOUNTING 


[§474 


§  474.  Opening  and  restating  accounts. — When  once  a  part- 
nership account  has  been  settled,  it  will  not  be  easily  disturbed, 
particularly  if  much  time  has  elapsed.  Still,  even  after  long 
acquiescence,  an  account  may  be  reopened  and  corrected  if  fraud 
was  practiced  in  the  first  accounting;  and,  within  a  reasonable 
time,  an  account  may  be  reopened  for  the  correction  of  errors 
or  omissions.  The  fraud,  however,  must  be  clearly  stated  and 
proved,  and  the  mistake  or  omission  must  be  as  to  some  matter 
not  known  to  the  complaining  party  at  the  time  it  was  com- 
mitted.20 


20  See  Claflin  v.  Bennett  (1892), 
51  Fed.  693;  Valentine  v.  Wysor 
(1890),  123  Ind.  47,  23  N.  E.  1076, 
7  L.  R.  A.  788,  Mechem's  Gas.  500, 
Merriwether  v.  Hardeman  (1879), 
51  Tex.  436;  Varner's  Appeal 
(1888),  2  Monaghan  (Pa.)  228,  16 
Atl.  98;  Cobb  v.  Cole  (1890),  44 
Minn.  278,  46  N.  W.  364;  King  v. 
White  (1890),  63  Vt.  158,  21  Atl. 
535,  25  Am.  St.  E.  752. 


A  partner  who  has  been  defrauded 
into  making  a  private  settlement 
with  his  partner  may  institute  a  suit 
for  accounting  without  rescinding 
the  settlement  and  restoring  the 
fraudulent  partner  to  statu  quo: 
Daniel  v.  Gillespie  (1909),  65  W. 
Va.  366,  64  S.  E.  254;  Oliver  v. 
House  (1906),  125  Ga.  637,  54  S.  E. 
732. 


409 


CHAPTER  XXII. 

OF   LIMITED   PARTNERSHIPS. 

§  475.  Of  the  nature  of  such  part-       §  479.  Who  may  form  them, 
nerships.  480.  For  what  business. 

476.  Must       be       authorized      by         481.  Conduct  of  business. 

statute.  482.  Withdrawal  of  capital. 

477.  The   usual  statutory   require-         483.  Special  partner  as  a  creditor. 

ments.  484.  Renewal. 

478.  Necessity  for  complying  with         485.  Dissolution  and  notice. 

requirements. 

§475.  Of  the  nature  of  such  partnerships. — Something  has 
been  already  said  in  relation  to  these  partnerships,1  but  they 
require  a  little  fuller  consideration.  The  purpose  of  such  or- 
ganizations is  to  permit  the  formation  of  partnerships  in  which 
some  of  the  partners,  who  manage  the  business,  shall  have  the 
general  personal  liability  of  ordinary  partners,  while  other  of 
the  partners,  who  take  no  part  in  the  management,  may  con- 
tribute a  given  amount  of  capital  and  assume  no  liability  beyond 
the  amount  so  contributed.  The  former  are  usually  designated 
as  general  partners,  and  the  latter  as  special  partners. 

§476.  Must  be  authorized  by  statute. — Partnerships  of  this 
nature  can  be  organized  only  when  permitted  by  statute,  but 
statutes  have  been  enacted  for  this  purpose  in  the  majority  of 
the  states. 

After  many  years,  England  adopted  a  limited  partnership  act 
in  1907.  A  Uniform  Limited  Partnership  Act  has  also  been 
prepared  by  the  Commissioners  on  Uniform  State  Laws  and 
recommended  to  the  States  for  enactment.  It  will  be  found 
in  the  Appendix.  It  contains  many  provisions  not  usually  in- 
cluded in  the  older  acts. 

The  demand  for  such  a  statute  is  felt  less  in  States  which 

1  Ante,  §§9,  10. 

410 


LIMITED   PARTNERSHIPS  [§  477 

have  liberal  incorporation  statutes.  In  many  of  the  States  it  is 
practically  as  easy  to  form  a  corporation  in  which  all  of  the 
associates  have  a  limited  liability  as  it  is  to  form  a  limited  part- 
nership in  which  only  part  of  the  associates  would  have  such  an 
exemption. 

Only  a  very  general  sketch  of  this  form  of  partnership  will 
here  be  undertaken. 

§  477.  The  usual  statutory  requirements. — The  statutory  pro- 
visions are  not  entirely  uniform,  but  they  are  substantially  so. 
They  require  usually  the  execution  of  a  certificate  which  shall 
set  forth  who  the  partners  are,  with  their  residence;  who  are 
to  be  the  general  partners,  and  who  the  special  partners;  the 
name  under  which  the  partnership  is  to  do  business ;  the  amount 
of  capital  actually  contributed  by  the  special  partners ;  the  busi- 
ness to  be  conducted,  and  the  date  at  which  the  partnership  is 
to  begin  and  end. 

This  statement  or  certificate  is  to  be  published  for  a  desig- 
nated period,  and  is  also  to  be  recorded  in  some  specified  public 
office. 

The  names  of  all  the  general  partners  must  usually  appear 
in  the  firm  name  (though  the  statutes  are  not  uniform  on  this 
point),  but  the  names  of  the  special  partners  must  not  appear.2 
Where  the  names  of  all  the  general  partners  are  required  to 
be  in  the  firm  name,  there  must  usually  be  no  such  addition 
as  "&  Co.,"  indicating  that  there  are  other  general  partners. 
They  are  sometimes  required  to  add  the  word  "limited"  to  the 
firm  name. 

The  contribution  of  the  special  partners  is  usually  required 
to  be  in  cash,  and  when  this  is  the  requirement  the  courts  have 
been  very  strict  in  refusing  to  recognize  anything  but  cash  as 
sufficient,3  though  a  more  liberal  interpretation  has  been  made 
in  more  recent  cases.4 

2  See    as   to    this   Buck    v.    Alley  775,  Oilm.    Gas.    619;    In   re   Allen 
(1895),  145  N.Y.  488,  40  N.  E.  236,  (1889),    41    Minn.    430,    43    N.   W. 
Burd.   Gas.   624;    Groves  v.  Wilson  382;    Durant  v.  Abendroth    (1877), 
(1897),    168    Mass.    370,   47   N.    E.  69  N.  Y.  148,  25  Am.  Eep.  158,  Me- 
100,  Burd.  Gas.  630.  chem's  Gas.  706. 

3  See  Lineweaver  v.  Slagle  (1885),  4  The    controversy  here   has   been 
64  Md.  465,  2  Atl.  693,  54  Am.  Eep.  chiefly  over  attempted  payment  by 

411 


§478] 


LAW   OP   PARTNERSHIP 


In  a  few  States  the  contribution  may  be  either  in  cash  or  other 
property,  but  usually  at  its  cash  value. 

As  will  be  observed,  the  Uniform  Limited  Partnership  Act  con- 
tains a  variety  of  provisions  not  usually  contained  in  the  older 
acts,  but  it  has  not  been  thought  necessary  here  to  point  out  the:; : 
changes. 

§478.  Necessity  for  complying  with  requirements.  —  Inas- 
much as  the  effect  of  such  organizations  is  to  restrict  the  ordi- 
nary liabilities  of  certain  of  the  partners,  it  is  held  that  there 
must  be  at  least  a  substantially  full  and  exact  compliance  with 
the  statutory  requirements.6 

And  since  it  is  only  by  force  of  the  statute  that  the  limited 
liability  is  secured,  it  follows  that  a  failure  to  comply  with  the 
statutory  requirements  will  render  the  special  partners  liable 
to  third  persons  like  general  partners.6  As  is  said  in  one  case,7 


checks:  See  Manhattan  Co.  v.  Laim- 
beer  (1888),  108  N.  Y.  578,  15  N. 
E.  712,  Gilm.  Gas.  615;  Chick  v. 
Robinson  (1899),  37  C.  C.  A.  205, 
95  Fed.  619,  Mechem's  Gas.  699; 
White  v.  Eiseman  (1892),  134  N.  Y. 
101,  31  N.  E.  276,  52  L.  R.  A.  833, 
Mechem's  Gas.  1099,  Burd.  Gas.  640. 

6  See  Selden  v.  Hall  (1886),  21 
Mo.  App.  452;  White  v.  Eiseman 
(1892),  134  N.  Y.  101,  31  N.  E. 
276,  52  L.  R.  A.  833,  Mechem  's  Gas. 
1099,  Burd.  Gas.  640;  Lineweaver  v. 
Slagle  (1885),  64  Md.  465,  54  Am. 
Rep.  775,  2  Atl.  693,  Gilm.  Gas.  619; 
Haddock  v.  Grinnell  Mfg.  Co. 
(1885),  109  Pa.  372,  1  Atl.  174; 
Crouch  v.  First  Nat.  Bank  (1895), 
156  111.  342,  40  N.  E.  974. 

6  See  Sheble  v.  Strong  (1889), 
128  Pa.  315,  18  Atl.  397;  Vanhorn 
v.  Corcoran  (1889),  127  Pa.  255,  4 
L.  R.  A.  386,  18  Atl.  16;  Manhattan 
Co.  v.  Laimbeer  (1888),  108  N.  Y. 
578,  15  N.  E.  712,  Gilm.  Gas.  615; 
Briar  Hill  C.  &  I.  Co.  v.  Atlas  Works 


(1891),  146  Pa.  290,  23  Atl.  326; 
Metropolitan  Nat.  Bank  v.  Sirret 
(1884),  97  N.  Y.  320,  15  Abb.  N.  C. 
318,  Burd.  Gas.  633;  First  Nat. 
Bank  v.  Creveling  (1896),  177  Pa. 
270,  35  Atl.  595,  Burd.  Gas.  638; 
Myers  v.  Electric  Co.  (1896),  59  N. 
J.  L.  153,  35  Atl.  1069,  Burd.  Gas. 
644. 

7Blumenthal  v.  Whitaker  (1895), 
170  Pa.  309,  33  Atl.  103.  The 
statutes  themselves  often  provide 
that  a  false  statement  in  the  cer- 
tificate shall  defeat  the  limited  lia- 
bility. Sheble  v.  Strong,  supra;  Dur- 
ant  v.  Abendroth  (1877),  69  N.  Y. 
148,  25  Am.  R.  158,  Mechem's  Gas. 
706.  But  the  failure  of  the  record- 
ing officer  to  properly  record  will 
not  usually  defeat  it  (Manhattan 
Co.  v.  Laimbeer,  supra),  unless  the 
party  was  himself  in  fault.  Henkel 
v.  Heyman  (1878),  91  111.  96,  Me- 
chem's Cas.  709.  A  special  partner 
who  by  reason  of  failure  to  comply 
with  the  statute  becomes  liable  like 


412 


LIMITED  PARTNERSHIPS  [§§  479-481 

"prima  facie,  a  firm  transacting  business  is  a  general  partner- 
ship. *  *  *  A  limited  partnership  that  has  not  complied 
with  the  law  of  its  creation  is  not  a  limited  partnership  at  all. 
It  is,  however,  a  partnership  in  which  all  the  members  are  liable 
as  at  common  law." 

§  479.  Who  may  form  them. — Competency  to  become  a  mem- 
ber of  a  limited  partnership  is,  in  general,  the  same  as  in  the 
case  of  an  ordinary  partnership.  Thus,  unless  the  statute  other- 
wise provides,8  infants  and  married  women  are  competent  to 
the  same  extent  as  they  have  been  seen  to  be  in  such  partner- 
ships.9 

As  to  number,  the  statutes  usually  require  "one  or  more" 
of  each  class,  though  a  few  statutes  require  two  or  more  general 
partners  at  least,  or  two  or  more  of  each  class. 

§  480.  For  what  business  authorized. — In  many  of  the  states 
no  restrictions  are  placed  upon  the  kind  of  business  that  may 
be  carried  on  by  a  limited  partnership ;  in  others  certain  kinds 
of  business,  usually  insurance  and  banking,  are  excepted. 

§  481.  Conduct  of  business. — The  general  partners  alone  rep- 
resent the  firm  and  carry  on  its  business.  If  the  special  partner 
takes  part  in  its  management,  or  if  his  name  is  used  with  his 
consent,  he  ordinarily  loses  irretrievably  his  limited  liability 
and  becomes  liable  as  a  general  partner.10  Contracts  must  there- 
fore be  made  by  and  in  the  name  of  the  general  partners,  and 
suits  must  be  brought  by  and  against  them.11 

a   general  partner,   is,   nevertheless,  32    N.    E.    1066,    Burd.    Gas.    619 

held  not  to  thereby  become  a  general  (infant) ;       Benard       v.      Packard 

partner  in  fact,  so  that  he  would  be  (1894),  12  C.  C.  A.  123,  64  Fed.  309, 

liable  like  one  if  he  withdrew  with-  Burd.  Cas.  623. 

out  giving  notice.     Tilge  v.  Brooks  10  See  Buck  v.  Alley   (1895),  145 

(1889),  124  Pa.  178,  16  Atl.  746,  2  N.  Y.  488,  40  N.  E.  236,  Burd.  Cas. 

L.  B.  A.  796,  Gilm.  Cas.  627.  Contra:  624;   (Groves  v.  Wilson   (1897),  168 

Haviland  v.  Chace  (1860),  39  Barb.  Mass.  370,  47  N.  E.  100,  Burd.  Cas. 

(N.  Y.)  283.  630;      Farnsworth      v.      Boardman 

8  Some    statutes    require    all    the  (1881),   131   Mass.   115;    Strang  v. 
parties  to  be  "of  full  age".  Thomas    (1902),   114  Wis.    599,   91 

9  See    Continental    Nat.    Bank    v.  N.  W.  237. 

Strauss  (1893),  137  N.  Y.  148,  553,          11  See  Columbia  Land  and  Cattle 

413 


§§482-485]  LAW  OP  PARTNERSHIP 

§482.  Withdrawal  of  capital. — The  withdrawal  of  his  cap- 
ital by  the  limited  partner  before  the  satisfaction  of  all  of  the 
demands  against  the  partnership  is  forbidden  by  the  statutes, 
under  penalties  which  range  from  a  liability  to  restore  it  to 
the  incurring  of  the  liability  of  a  general  partner. 

§483.  Special  partner  as  a  creditor. — Many  of  the  statutes 
contain  provisions  that  no  special  partner  shall  be  paid  as  a 
creditor  until  all  the  other  creditors  of  the  firm  are  satisfied. 
Whether  this  prohibition  refers  to  a  claim  for  the  restoration 
of  his  capital  merely,  or  extends  to  later  loans,  etc.,  made  to 
the  firm,  is  in  dispute.12 

§  484.  Renewal. — The  statutes  commonly  provide  for  renew- 
ing the  partnership  at  the  expiration  of  the  original  term,  and 
this  may  be  done  usually  by  making  a  renewal  of  the  certificate, 
publication  and  record.  Whether  upon  such  renewal  it  must 
be  the  fact  that  the  capital  originally  contributed  is  still  intact 
and  unimpaired  (under  the  penalty,  if  it  is  not,  of  charging 
the  special  partners  like  general  partners),  is  the  subject  of  a 
sharp  conflict  in  the  cases,  which  does  not  seem  to  be  referable 
merely  to  differences  in  phraseology.13 

§  485.  Dissolution  and  notice. — If  not  renewed,  the  limited 
partnership  comes  to  an  end  as  a  limited  partnership  at  the 

Co.  v.  Daly  (1891),  46  Kan.  504,  26  (1885),   109   Pa.    372,   1    Atl.    174; 

Pac.  1042,  Oilm.  Gas.  625;  Sharp  v.  Fourth  St.  Nat.  Bank  v.  Whitaker 

Hutchinson   (1885),  100  N.  Y.  533,  (1895),   170  Pa.  297,   33  AtL   100, 

3   N.   E.   500,   Meehem's  Cas.   718;  Burd.  Gas.  655.     Under  the  statute 

Jaffe  v.  Krum  (1885),  88  Mo.  669,  as    amended:     Durgin    v.     Colburn 

Meehem's  Cas.  716,  Gilm.  Cas.  626.  (1900),  176  Mass.  110,  57  N.  E.  213, 

12  That  it   applies   to   all   claims,  Mechem  's   Cas.   713.     That   the  re- 
see  Jaffe  v.  Krum    (1886),  88  Mo.  newal  refers  merely  to  the  fact  of 
669,  Meehem's  Cas.  716,  Gilm.  Cas.  original  contribution,  see  Fifth  Ave. 
626;   Dunning's  Appeal   (1863),  44  Bank  v.  Colgate  (1890),  120  N.  Y. 
Pa.    150.     Contra:   Clapp   v.  Laeey  381,  24  N.  E.  799,  8  L.  E.  A.  712, 
(1868),    35    Conn.    463,   Burd.    Cas.  4  Silvernail  Ct.  App.  544;  Hogan  v. 
611.  Hadzsits  (1897),  113  Mich.  568,  71 

13  That  it  must  be  unimpaired,  see  N.  W.  1092,  Burd.  Cas.  600. 
Haddock     v.      Grinnell     Mfg.      Co. 

414 


LIMITED  PARTNERSHIPS  [§  485 

time  designated,  and  if  continued  afterward  it  will  be  as  a  gen- 
eral partnership.  It  may  also  be  terminated  before  that  time 
by  operation  of  law  or  the  act  of  the  partners,  like  general  part- 
nerships.14 Where  it  is  so  terminated  before  the  time  limited 
has  expired,  and  no  statutory  provision  for  notice  is  made,  notice 
must  usually  be  given  in  the  same  cases  and  manner  as  upon 
the  dissolution  of  a  general  partnership ;  though  where  it  is 
terminated  by  the  act  of  the  partner  before  the  expiration  of 
the  stipulated  term,  the  statutes  usually  require  that  notice 
shall  be  published  and  recorded  like  the  orginal  certificate. 
"Where  it  comes  to  an  end  by  expiration  of  the  time  fixed,  no 
notice  is  necessary,  as  the  published  and  recorded  certificate  gives 
notice  to  all  the  world. 

14  See  the  discussion  in  Ames  v.  61 0,  wherein  it  is  held  that  the  death 
Downing  (1850),  1  Bradf.  Sur.  (N.  of  the  limited  partner  dissolves  the 
Y.)  321,  Burd.  Gas.  606,  Gilm.  Gas.  partnership. 


415 


APPENDIX  A 


UNIFORM  PARTNERSHIP  ACT 


PART  I. 
PRELIMINARY  PROVISIONS. 

SECTION  1.  [Name  of  Act.]  This  act  may  be  cited  as  Uniform  Part- 
nership Act. 

SEC.  2.  [Definition  of  Terms.]  In  this  act,  "Court"  includes  every 
court  and  judge  having  jurisdiction  in  the  case. 

"Business"  includes  every  trade,  occupation,  or  profession. 

"Person"  includes  individuals,  partnerships,  corporations,  and  other 
associations. 

"Bankrupt"  includes  bankrupt  under  the  Federal  Bankruptcy  Act  or 
insolvent  under  any  state  insolvent  act. 

"Conveyance"  includes  every  assignment,  lease,  mortgage,  or  encum- 
brance. 

"Real  property"  includes  land  and  any  interest  or  estate  in  land. 

SEO.  3.  [Interpretation  of  Knowledge  and  Notice.]  (1)  A  person 
has  "knowledge"  of  a  fact  within  the  meaning  of  this  act  not  only  when 
he  has  actual  knowledge  thereof,  but  also  when  he  has  knowledge  of  such 
other  facts  as  in  the  circumstances  shows  bad  faith. 

(2)     A  person  has  "notice"  of  a  fact  within  the  meaning  of  this  act 
when  the  person  who  claims  the  benefit  of  the  notice 
(a)     States  the  fact  to  such  person,  or 
(6)     Delivers  through  the  mail,  or  by  other  means  of  communication, 

a  written  statement  of  the  fact  to  such  person  or  to  a  proper  person 

at  his  place  of  business  or  residence. 

SEC.  4.  [Rules  of  Construction.]  (1)  The  rule  that  statutes  in 
derogation  of  the  common  law  are  to  be  strictly  construed  shall  have  no 
application  to  this  act. 

(2)  The  law  of  estoppel  shall  apply  under  this  act. 

(3)  The  law  of  agency  shall  apply  under  this  act. 

(4)  This  act  shall  be  so  interpreted  and  construed  as  to  effect  its  gen- 
eral purpose  to  make  uniform  the  law  of  those  states  which  enact  it. 

(5)  This  act  shall  not  be  construed  so  as  to  impair  the  obligations  of 
Mech.  Part.— 27  417 


APPENDIX  A 

any  contract  existing  when  the  act  goes  into  "effect,  nor  to  affect  any 
action  or  proceedings  begun  or  right  accrued  before  this  act  takea  effect. 
SEC.  5.  [Bules  for  Cases  not  Provided  for  in  this  Act.]  In  any  case 
not  provided  for  in  this  act  the  rules  of  law  and  equity,  including  the 
law  merchant,  shall  govern. 

PAET  II. 
NATUEE  OF  A  PAETNERSHIP. 

SEC.  6.  [Partnership  Defined.]  (1)  A  partnership  is  an  association 
of  two  or  more  persons  to  carry  on  as  co-owners  a  business  for  profit. 

(2)  But  any  association  formed  under  any  other  statute  of  this  state, 
or  any  statute  adopted  by  authority,  other  than  the  authority  of  this  state, 
is  not  a  partnership  under  this  act,  unless  such  association  would  have 
been  a  partnership  in  this  state  prior  to  the  adoption  of  this  act;  but 
this  act  shall  apply  to  limited  partnerships  except  in  so  far  as  the  statutes 
relating  to  such  partnerships  are  inconsistent  herewith. 

SEC.  7.  [Eules  for  Determining  the  Existence  of  a  Partnership.]  In 
determining  whether  a  partnership  exists,  these  rules  shall  apply: 

(1)  Except  as  provided  by  section  16  persons  who  are  not  partners 
as  to  each  other  are  not  partners  as  to  third  persons. 

(2)  Joint  tenancy,  tenancy  in  common,  tenancy  by  the  entireties,  joint 
property,  common  property,  or  part  ownership  does  not  of  itself  establish 
a  partnership,  whether  such  co-owners  do  or  do  not  share  any  profits  made 
by  the  use  of  the  property. 

(3)  The  sharing  of  gross  returns  does  not  of  itself  establish  a  partner- 
ship, whether  or  not  the  persons  sharing  them  have  a  joint  or  common 
right  or  interest  in  any  property  from  which  the  returns  are  derived. 

(4)  The  receipt  by  a  person  of  a  share  of  the  profits  of  a  business 
is  prima  facie  evidence  that  he  is  a  partner  in  the  business;  but  no  such 
inference  shall  be  drawn  if  such  profits  were  received  in  payment: 

(a)     As  a  debt  by  installments  or  otherwise, 

(6)     As  wages  of  an  employee  or  rent  to  a  landlord, 

(c)  As   an   annuity   to   a  widow   or   representative   of  a   deceased 
partner, 

(d)  As  interest  on  a  loan,  though  the  amount  of  payment  vary  with 
the  profits  of  the  business, 

(e)  As  the  consideration  for  the  sale  of  the  good-will  of  a  business 
or  other  property  by  installments  or  other-wise. 

SEC.  8.  [Partnership  Property.]  (1)  All  property  originally  brought 
into  the  partnership  stock  or  subsequently  acquired  by  purchase  or  other- 
wise, on  account  of  the  partnership  is  partnership  property. 

(2)  Unless    the    contrary    intention    appears,    property    acquired    with 
partnership  funds  is  partnership  property. 

(3)  Any  estate  in  real  property  may  be  acquired  in  the  partnership 
name.     Title  so  acquired  can  be  conveyed  only  in  the  partnership  name. 

418 


UNIFORM  PARTNERSHIP  ACT 

(4)  A  conveyance  to  a  partnership  in  the  partnership  name,  though 
without  words  of  inheritance,  passes  the  entire  estate  of  the  grantor  unless 
a  contrary  intent  appears. 

PART  III. 

EELATIONS  OF  PARTNERS  TO  PERSONS  DEALING  WITH  THE 

PARTNERSHIP. 

SEC.  9.  [Partner  Agent  of  Partnership  as  to  Partnership  Business.] 
(1)  Every  partner  is  an  agent  of  the  partnership  for  the  purpose  of  its 
business,  and  the  act  of  every  partner,  including  the  execution  in  the 
partnership  name  of  any  instrument,  for  apparently  carrying  on  in  the 
usual  way  the  business  of  the  partnership  of  which  he  is  a  member  binds 
the  partnership,  unless  the  partner  so  acting  has  in  fact  no  authority  to 
act  for  the  partnership  in  the  particular  matter,  and  the  person  with  whom 
he  is  dealing  has  knowledge  of  the  fact  that  he  has  no  such  authority. 

(2)  An  act  of  a  partner  which  is  not  apparently  for  the  carrying  on 
of  the  business  of  the  partnership  in  the  usual  way  does  not  bind  the 
partnership  unless  authorized  by  the  other  partners. 

(3)  Unless    authorized   by   the    other   partners    or   unless    they    have 
abandoned  the  business,  one  or  more  but  less  than  all  the  partners  have 
no  authority  to: 

(a)     Assign  the  partnership  property  in  trust  for  creditors  or  on  the 
assignee's  promise  to  pay  the  debts  of  the  partnership. 
(6)     Dispose  of  the  good-will  of  the  business, 

(c)  Do  any  other  act  which  would  make  it  impossible  to  carry  on 
the  ordinary  business  of  a  partnership, 

(d)  Confess  a  judgment, 

(e)  Submit  a  partnership  claim  or  liability  to  arbitration  or  refer- 
ence. 

(4)  No  act  of  a  partner  in  contravention  of  a  restriction  on  authority 
shall  bind  the  partnership  to  persons  having  knowledge  of  the  restriction. 

SEO.  10.  [Conveyance  of  Real  Property  of  the  Partnership.]  (1) 
Where  title  to  real  property  is  in  the  partnership  name,  any  partner  may 
convey  title  to  such  property  by  a  conveyance  executed  in  the  partnership 
name;  but  the  partnership  may  recover  such  property  unless  the  partner's 
act  binds  the  partnership  under  the  provisions  of  paragraph  (1)  of  section 
9,  or  unless  such  property  has  been  conveyed  by  the  grantee  or  a  person 
claiming  through  such  grantee  to  a  holder  for  value  without  knowledge 
that  the  partner,  in  making  the  conveyance,  has  exceeded  his  authority. 

(2)  Where  title  to  real  property  is  in  the  name  of  the  partnership,  a 
conveyance  executed  by  a  partner,  in  his  own  name,  passes  the  equitable 
interest  of  the  partnership,  provided  the  act  is  one  within  the  authority 
of  the  partner  under  the  provisions  of  paragraph  (1)   of  section  9. 

(3)  Where  title  to  real  property  is  in  the  name  of  one  or  more  but 
not   all  the  partners,  and  the  record  does  not   disclose  the  right  of  the 

419 


APPENDIX  A 

partnership,  the  partners  in  whose  name  the  title  stands  may  convey  title 
to  such  property,  but  the  partnership  may  recover  such  property  if  the 
partners'  act  does  not  bind  the  partnership  under  the  provisions  of  para- 
graph (1)  of  section  9,  unless  the  purchaser  or  his  assignee,  is  a  holder 
for  value,  without  knowledge. 

(4)  Where  the  title  to  real  property  is  in  the  name  of  one  or  more  or 
all  the  partners,  or  in  a  third  person  in  trust  for  the  partnership,  a  con- 
veyance executed  by   a  partner  in  the  partnership  name,  or  in  his  own 
name,  passes  the  equitable  interest  of  the  partnership,  provided  the  act 
is  one  within  the  authority  of  the  partner  under  the  provisions  of  para- 
graph  (1)    SI  section  9. 

(5)  Where  the  title  to  real  property  is  in  the  names  of  all  the  part- 
ners  a  conveyance  executed  by   all  the  partners   passes  all  their  rights 
in  such  property. 

SEC.  11.  [Partnership  Bound  by  Admission  of  Partner.]  An  admis- 
sion or  representation  made  by  any  partner  concerning  partnership  af- 
fairs within  the  scope  of  his  authority  as  conferred  by  this  act  is  evidence 
against  the  partnership. 

SEC.  12.  [Partnership  Charged  with  Knowledge  of  or  Notice  to  Part- 
ner.] Notice  to  any  partner  of  any  matter  relating  to  partnership  affairs, 
and  the  knowledge  of  the  partner  acting  in  the  particular  matter,  ac- 
quired while  a  partner  or  then  present  to  his  mind,  and  the  knowledge  of 
any  other  partner  who  reasonably  could  and  should  have  communicated  it 
to  the  acting  partner,  operate  as  notice  to  or  knowledge  of  the  partner- 
ship, except  in  the  case  of  a  fraud  on  the  partnership  committed  by  or 
with  the  consent  of  that  partner. 

SEO.  13.  [Partnership  Bound  by  Partner's  Wrongful  Act.]  Where, 
by  any  wrongful  act  or  omission  of  any  partner  acting  in  the  ordinary 
course  of  the  business  of  the  partnership,  or  with  the  authority  of  his  co- 
partners, loss  or  injury  is  caused  to  any  person,  not  being  a  partner  in 
the  partnership,  or  any  penalty  is  incurred,  the  partnership  is  liable  there- 
for to  the  same  extent  as  the  partner  so  acting  or  omitting  to  act. 

SEC.  14.  [Partnership  Bound  by  Partner's  Breach  of  Trust.]  The 
partnership  is  bound  to  make  good  the  loss: 

(a)     Where    one   partner    acting   within   the    scope   of   his   apparent 

authority  receives  money  or  property  of  a  third  person  and  misapplies 

it;  and 

(&)     Where   the   partnership  in  the   course   of   its   business  receives 

money  or   property   of  a   third  person  and  the  money  or  property   so 

received  is  misapplied  by  any  partner  while  it  is  in  the  custody  of  the 

partnership. 

SEC.  15.     [Nature  of  Partner's  Liability.]     All  partners  are  liable 

(a)     Jointly  and  severally  for  everything  chargeable  to  the  partner- 

nership  under  sections  13  and  14. 

(6)     Jointly  for  all  other  debts  and  obligations  of  the  partnership; 

but  any  partner  may  enter  into  a   separate   obligation  to  perform   a 

partnership  contract. 

420 


UNIFORM  PARTNERSHIP   ACT 

SEO.  16.  [Partner  by  Estoppel.]  (1)  When  a  person,  by  words 
spoken  or  written  or  by  conduct,  represents  himself,  or  consents  to  another 
representing  him  to  any  one,  as  a  partner  in  an  existing  partnership  or 
with  one  or  more  persons  not  actual  partners,  he  is  liable  to  any  such 
person  to  whom  such  representation  has  been  made,  who  has,  on  the  faith 
of  such  representation,  given  credit  to  the  actual  or  apparent  partnership, 
and  if  he  has  made  such  representation  or  consented  to  its  being  made  in 
a  public  manner  he  is  liable  to  such  person,  whether  the  representation 
has  or  has  not  been  made  or  communicated  to  such  person  so  giving  credit 
by  or  with  the  knowledge  of  the  apparent  partner  making  the  representa- 
tion or  consenting  to  its  being  made. 

(a)     When  a  partnership  liability  results,  he  is  liable  as  though  he 

were  an  actual  member  of  the  partnership. 

(6)     When  no  partnership  liability  results,  he  is  liable  jointly  with 

the  other  persons,  if  any,  so  consenting  to  the  contract  or  representation 

as  to  incur  liability,  otherwise  separately. 

(2)  When  a  person  has  been  thus  represented  to  be  a  partner  in  an 
existing  partnership,  or  with  one  or  more  persons  not  actual  partners,  he 
is  an  agent  of  the  persons  consenting  to  such  representation  to  bind  them 
to  the  same  extent  and  in  the  same  manner  as  though  he  were  a  partner 
in  fact,  with  respect  to  persons  who  rely  upon  the  representation.  Where 
all  the  members  of  the  existing  partnership  consent  to  the  representation, 
a  partnership  act  or  obligation  results;  but  in  all  other  cases  it  is  the 
joint  act  or  obligation  of  the  person  acting  and  the  persons  consenting  to 
the  representation. 

SEC.  17.  [Liability  of  Incoming  Partner.]  A  person  admitted  as  a 
partner  into  an  existing  partnership  is  liable  for  all  the  obligations  of  the 
partnership  arising  before  his  admission  as  though  he  had  been  a  partner 
when  such  obligations  were  incurred,  except  that  this  liability  shall  be 
satisfied  only  out  of  partnership  property. 

PART  IV. 
EELATIONS  OF  PARTNERS  TO   ONE  ANOTHER. 

SEO.  18.  [Rules  Determining  Rights  and  Duties  of  Partners.]  The 
rights  and  duties  of  the  partners  in  relation  to  the  partnership  shall  be 
determined,  subject  to  any  agreement  between  them,  by  the  following 
rules: 

(a)  Each  partner  shall  be  repaid  his  contributions,  whether  by  way 
of  capital  or  advances  to  the  partnership  property  and  share  equally  in 
the  profits  and  surplus  remaining  after  all  liabilities,  including  those 
to  partners,  are  satisfied;  and  must  contribute  towards  the  losses, 
whether  of  capital  or  otherwise,  sustained  by  the  partnership  according 
to  his  share  in  the  profits. 

(6)  The  partnership  must  indemnify  every  partner  in  respect  of  pay- 
ments made  and  personal  liabilities  reasonably  incurred  by  him  in  the 

421 


APPENDIX   A 

ordinary  and  proper  conduct  of  its  business,  or  for  the  preservation  of 
its  business  or  property. 

(c)  A  partner,  who  in  aid  of  the  partnership  makes  any  payment  or 
advance  beyond  the  amount  of  capital  which  he  agreed  to  contribute, 
shall  be  paid  interest  from  the  date  of  the  payment  or  advance. 

(d)  A  partner  shall  receive  interest  on  the  capital  contributed  by 
him  only  from  the  date  when  repayment  should  be  made. 

(e)  All  partners  have  equal  rights  in  the  management  and  conduct 
of  the  partnership  business. 

(/)  No  partner  is  entitled  to  remuneration  for  acting  in  the  partner- 
ship business,  except  that  a  surviving  partner  is  entitled  to  reasonable 
compensation  for  his  services  in  winding  up  the  partnership  affairs. 

(<7)  No  person  can  become  a  member  of  a  partnership  without  the 
consent  of  all  the  partners. 

(h)     Any  difference  arising  as  to   ordinary  matters  connected  with 
the  partnership  business  may  be  decided  by  a  majority  of  the  partners; 
but  no  act  in  contravention  of  any  agreement  between  the  partners  may 
be  done  rightfully  without  the  consent  of  all  the  partners. 
SEC.  19.     [Partnership   Books.]      The  partnership  books  shall  be  kept, 
subject  to  any  agreement  between  the  partners,  at  the  principal  place  of 
business   of   the  partnership,   and  every  partner   shall  at  all  times  have 
access  to  and  may  inspect  and  copy  any  of  them. 

SEC.  20.  [Duty  of  Partners  to  Render  Information.]  Partners  shall 
render  on  demand  true  and  full  information  of  all  things  affecting  the 
partnership  to  any  partner  or  the  legal  representative  of  any  deceased 
partner  or  partner  under  legal  disability. 

SEC.  21.  [Partner  Accountable  as  a  Fiduciary.]  Every  partner  must 
account  to  the  partnership  for  any  benefit,  and  hold  as  trustee  for  it  any 
profits  derived  by  him  without  the  consent  of  the  other  partners  from 
any  transaction  connected  with  the  formation,  conduct,  or  liquidation  of 
the  partnership  or  from  any  use  by  him  of  its  property. 

(2)  This  section  applies  also  to  the  representatives  of  a  deceased  part- 
ner engaged  in  the  liquidation  of  the  affairs  of  the  partnership  as  the 
personal  representatives  of  the  last  surviving  partner. 

SEC.  22.  [Eight  to  an  Account.]  Any  partner  shall  have  the  right  to 
a  formal  account  as  to  partnership  affairs: 

(a)  If  he  is  wrongfully  excluded  from  the  partnership  business  or 
possession  of  its  property  by  his  co-partners, 

(6)     If  the  right  exists  under  the  terms  of  any  agreement, 

(c)  As  provided  by  section  21, 

(d)  Whenever  other   circumstances  render  it  just  and  reasonable. 
SEC.    23.     {Continuation    of    Partnership    Beyond    Fixed    Term.]     (1) 

When  a  partnership  for  a  fixed  term  or  particular  undertaking  is  con- 
tinued after  the  termination  of  such  term  or  particular  undertaking  with- 
out any  express  agreement,  the  rights  and  duties  of  the  partners  remain 
the  same  as  they  were  at  such  termination,  so  far  as  is  consistent  with  a 
partnership  at  will. 

422 


UNIFORM  PARTNERSHIP  ACT. 

(2)  A  continuation  of  the  business  by  the  partners  or  such  of  them 
as  habitually  acted  therein  during  the  term,  without  any  settlement  or 
liquidation  of  the  partnership  affairs,  is  prima  facie  evidence  of  a  con- 
tinuation of  the  partnership. 

PART  V. 
PROPERTY   RIGHTS   OF   A   PARTNER. 

SEC.  24.  [Extent  of  Property  Rights  of  a  Partner.]  The  property 
rights  of  a  partner  are  (1)  his  rights  in  specific  partnership  property, 
(2)  his  interest  in  the  partnership,  and  (3)  his  right  to  participate  in 
the  management. 

SEC.  25.  [Nature  of  a  Partner's  Right  in  Specific  Partnership  Prop- 
erty.] 

(1)  A  partner   is   co-owner  with  his  partners   of   specific   partnership 
property  holding  as  a  tenant  in  partnership. 

(2)  The  incidents  of  this  tenancy  are  such  that: 

(a)  A  partner,  subject  to  the  provisions  of  this  act  and  to  any  agree- 
ment between  the  partners,  has  an  equal  right  with  his  partners  to 
possess  specific  partnership  property  for  partnership  purposes;  but  he 
has  no  right  to  possess  such  property  for  any  other  purpose  without  the 
consent  of  his  partners. 

(6)  A  partner's  right  in  specific  partnership  property  is  not  assign- 
able except  in  connection  with  the  assignment  of  the  rights  of  all  the 
partners  in  the  same  property. 

(c)  A  "partner's  right  in  specific  partnership  property  is  not  subject 
to  attachment  or  execution,  except  on  a  claim  against  the  partnership. 
When  partnership  property  is  attached  for  a  partnership  debt  the  part- 
ners, or  any  of  them,  or  the  representatives  of  a  deceased  partner,  can- 
not claim  any  right  under  the  homestead  or  exemption  laws. 

(d)  On  the  death  of  a  partner  his  right  in  specific  partnership  prop- 
erty vests  in  the  surviving  partner  or  partners,  except  where  the  deceased 
was  the  last  surviving  partner,  when  his  right  in  such  property  vests  in 
his  legal   representative.      Such   surviving   partner    or   partners,   or   the 
legal  representative  of  the  last  surviving  partner,  has  no  right  to  possess 
the  partnership  property  for  any  but  a  partnership  purpose. 

(e)  A  partner's  right  in  specific  partnership  property  is  not  subject 
to  dower,  curtesy,  or  allowances  to  widows,  heirs,  or  next  of  kin. 

SEC.  26.  [Nature  of  Partner's  Interest  in  the  Partnership.]  A  part- 
ner 's  interest  in  the  partnership  is  his  share  of  the  profits  and  surplus,  and 
the  same  is  personal  property. 

SEC.  27.  [Assignment  of  Partner's  Interest.]  (1)  A  conveyance  by 
a  partner  of  his  interest  in  the  partnership  does  not  of  itself  dissolve  the 
partnership,  nor,  as  against  the  other  partners  in  the  absence  of  agree- 
ment, entitle  the  assignee,  during  the  continuance  of  the  partnership,  to 
interfere  in  the  management  or  administration  of  the  partnership  business 

423 


APPENDIX   A 

er  affairs,  or  to  require  any  information  or  account  of  partnership  transac- 
tions, or  to  inspect  the  partnership  books;  but  it  merely  entitles  the  as- 
signee to  receive  in  accordance  with  his  contract  the  profits  to  which  the 
assigning  partner  would  otherwise  be  entitled. 

(2)  In  case  of  a  dissolution  of  the  partnership,  the  assignee  is  en- 
titled to  receive  his  assignor's  interest  and  may  require  an  account  from 
the  date  only  of  the  last  account  agreed  to  by  all  the  partners. 

SEC.  28.  [Partner's  Interest  Subject  to  Charging  Order.]  (1)  On 
due  application  to  a  competent  court  by  any  judgment  creditor  of  a  part- 
ner, the  court  which  entered  the  judgment,  order,  or  decree,  or  any  other 
court,  may  charge  the  interest  of  the  debtor  partner  with  payment  of  the 
unsatisfied  amount  of  such  judgment  debt  with  interest  thereon;  and  may 
then  or  later  appoint-  a  receiver  of  his  share  of  the  profits,  and  of  any  other 
money  due  or  to  fall  due  to  him  in  respect  of  the  partnership,  'and  make  all 
other  orders,  directions,  accounts  and  inquiries  which  the  debtor  partner 
might  have  made,  or  which  the  circumstances  of  the  case  may  require. 

(2)  The  interest  charged  may  be  redeemed  at  any  time  before  fore- 
closure, or  in  case  of  a  sale  being  directed  'by  the  court  may  be  purchased 
without  thereby  causing  a  dissolution: 

(a)     With  separate  property,  by  any  one  or  more  of  the  partners,  or 
(&)     With  partnership  property,  by  any  one  or  more  of  the  partners 

with  the  consent  of  all  the  partners  whose  interests  are  not  so  charged 

or  sold. 

(3)     Nothing  in  this  act  shall  be  held  to  deprive  a  partner  of  his  right, 

if  any,  under  the  exemption  laws,  as  regards  his  interest  in  the  partner- 
ship. 

PAET  VI. 

DISSOLUTION  AND  WINDING  UP. 

SEC.  29.  [Dissolution  Defined.]  The  dissolution  of  a  partnership  is  the 
change  in  the  relation  of  the  partners  caused  by  any  partner  ceasing  to  be 
associated  in  the  carrying  on  as  distinguished  from  the  winding  up  of  the 
business. 

SEC.  30.  [Partnership  Not  Terminated  by  Dissolution.]  On  dissolution 
the  partnership  is  not  terminated,  but  continues  until  the  winding  up  of 
partnership  affairs  is  completed. 

SEC.  31.     [Causes  of  Dissolution.]     Dissolution  is  caused: 

(1)     Without  violation  of  the  agreement  between  the  partners, 

(a)  By  the  termination  of  the  definite  term  or  particular  undertaking 
specified  in  the  agreement, 

(6)  By  the  express  will  of  any  partner  when  no  definite  term  or  par- 
ticular undertaking  is  specified, 

(c)  By  the  express  will  of  all  the  partners  who  have  not  assigned  their 
interests  or  suffered  them  to  be  charged  for  their  separate  debts,  either 
before  or  after  the  termination  of  any  specified  term  or  particular  under- 
taking, 

424 


UNIFORM  PARTNERSHIP  ACT 

(d)  By  the  expulsion  of  any  partner  from  the  business  bona  fidf  in 
accordance  with  such  a  power  conferred  by  the  agreement  between  the 
partners; 

(2)  In  contravention  of  the  agreement  between  the  partners,  where  the 
circumstances  do  not  permit  a  dissolution  under  any  other  provision  of  this 
section,  by  the  express  will  of  any  partner  at  any  time; 

(3)  By  any   event  which  makes  it   unlawful  for  the   business  of  the 
partnership  to  be  carried  on  or  for  the  members  to  carry  it  on  in  partner- 
ship; 

(4)  By  the  death  of  any  partner; 

(5)  By  the  bankruptcy  of  any  partner  or  the  partnership; 

(6)  By  decree  of  court  under  section  32. 

SEC.  32.  [Dissolution  by  Decree  of  Court.]  (1)  On  application  by  or 
for  a  partner  the  court  shall  decree  a  dissolution  whenever: 

(a)  A  partner  has  been  declared  a  lunatic  in  any  judicial  proceeding 
or  is  shown  to  be  of  unsound  mind, 

(6)  A  partner  becomes  in  any  other  way  incapable  of  performing  his 
part  of  the  partnership  contract, 

(c)  A  partner  has  been  guilty  of  such  conduct  as  tends  to  affect  prej- 
udicially the  carrying  on  of  the  business, 

(d)  A  partner  willfully  or  persistently  commits  a  breach  of  the  part- 
nership agreement,  or  otherwise  so  conducts  himself  in  matters  relating 
to  the  partnership  business  that  it  is  not  reasonably  practicable  to  carry 
on  the  business  in  partnership  with  him, 

(e)  The  business  of  the  partnership  can  only  be  carried  on  at  a  loss, 
(/)     Other  circumstances  render  a  dissolution  equitable. 

(2)  On  the  application  of  the  purchaser  of  a  partner's  interest  under 
sections  28  or  29: 

(a)  After  the  termination  of  the  specified  term  or  particular  under- 
taking, 

(b)  At  any  time  if  the  partnership  was  a  partnership  at  will  when 
the  interest  was  assigned  or  when  the  charging  order  was  issued. 

SEC.  33.  [General  Effect  of  Dissolution  on  Authority  of  Partner.]  Ex- 
cept so  far  as  may  be  necessary  to  wind  up  partnership  affairs  or  to  com- 
plete transactions  begun  but  not  then  finished,  dissolution  terminates  all 
authority  of  any  partner  to  act  for  the  partnership, 

(1)  With  respect  to  the  partners, 

(a)  When  the  dissolution  is  not  by  the  act,  bankruptcy  or  death  of 
a  partner;  or 

(6)  When  the  dissolution  is  by  such  act,  bankruptcy  or  death  of  a 
partner,  in  cases  where  section  34  so  requires. 

(2)  With  respect  to  persons  not  partners,  as  declared  in  section  35. 

SEC.  34.  [Bight  of  Partner  to  Contribution  From  Co-partners  After  Dis- 
solution.] Where  the  dissolution  is  caused  by  the  act,  death  or  bankruptcy 
of  a  partner,  each  partner  is  liable  to  his  co-partners  for  his  share  of  any 
liability  created  by  any  partner  acting  for  the  partnership  as  if  the  partner- 
ship had  not  been  dissolved  unless 

425 


APPENDIX  A 

(a)  The  dissolution  being  by  act  of  any  partner,  the  partner  acting 
tor  the  partnership  had  knowledge  of  the  dissolution,  or 

(&)  The  dissolution  being  by  the  death  or  bankruptcy  of  a  partner, 
the  partner  acting  for  the  partnership  had  knowledge  or  notice  of  the 
death  or  bankruptcy. 

SEC.  35.  [Power  of  Partner  to  Bind  Partnership  to  Third  Persons  After 
Dissolution.]  (1)  After  dissolution  a  partner  ean  bind  the  partnership 
except  as  provided  in  Paragraph  (3) 

(a)  By  any  act  appropriate  for  winding  up  partnership  affairs  or 
completing  transactions  unfinished  at  dissolution; 

(&)  By  any  transaction  which  would  bind  the  partnership  if  dissolu- 
tion had  not  taken  place,  provided  the  other  party  to  the  transaction 

(I)  Had  extended  credit  to  the  partnership  prior  to  dissolution  and 
had  no  knowledge  or  notice  of  the  dissolution;  or 

(II)  Though  he  had  not  so  extended  credit,  had  nevertheless  known  of 
the  partnership  prior  to  dissolution,  and,  having  no  knowledge  or  notice 
of  dissolution,  the  fact  of  dissolution  had  not  been  advertised  in  a  news- 
paper of  general  circulation  in  the  place  (or  in  each  place  if  more  than 
one)  at  which  the  partnership  business  was  regularly  carried  on. 

(2)  The  liability  of  a  partner  under  Paragraph  (1Z>)  shall  be  satisfied 
o'ut  of  partnership  assets  alone  when  such  partner  had  been  prior  to  dis- 
solution 

(a)  Unknown  as  a  partner  to  the  person  with  whom  the  contract  is 
made;  and 

(&)  So  far  unknown  and  inactive  in  partnership  affairs  that  the  busi- 
ness reputation  of  the  partnership  could  not  be  said  to  have  been  in  any 
degree  due  to  his  connection  with  it. 

(3)  The  partnership  is  in  no  case  bound  by  any  act  of  a  partner  after 
dissolution 

(a)  Where  the  partnership  is  dissolved  because  it  is  unlawful  to  carry 
on  the  business,  unless  the  act  is  appropriate  for  winding  up  partnership 
affairs;  or 

(ft)     Where  the  partner  has  become  bankrupt;   or 

(c)  Where  the  partner  has  no  authority  to  wind  np  partnership  af- 
fairs; except  by  a  transaction  with  one  who 

(I)  Had  extended  credit  to  the  partnership  prior  to  dissolution  and 
had  no  knowledge  or  notice  of  his  want  of  authority;  or 

(II)  Had  not  extended  credit  to  the  partnership  prior  to  dissolution, 
and,  having  no  knowledge  or  notice  of  his  want  of  authority,  the  fact  of 
his  want  of  authority  has  not  been  advertised  in  the  manner  provided  for 
advertising  the  fact  of  dissolution  in  Paragraph  (1611). 

(4)  Nothing  in  this  section  shall  affect  the  liability  under  Section  16 
of  any  person  who  after  dissolution  represents  himself  or  consents  to  an- 
other representing  him  as  a  partner  in  a  partnership  engaged  in  carrying 
on  business. 

SEC.  36.     [Effect  of  Dissolution  on  Partner's  Existing  Liability.]      (1) 

425 


The  dissolution  of  the  partnership  does  not  of  itself  discharge  the  existing 
liability  of  any  partner. 

(2)  A  partner  is  discharged  from  any  existing  liability  upon  dissolution 
of  the  partnership  by  an  agreement  to  that  effect  between  himself,  the 
partnership  creditor  and  the  person  or  partnership  continuing  the  business; 
and  such  agreement  may  be  inferred  from  the  course  of  dealing  between 
the  creditor  having  knowledge  of  the  dissolution  and  the  person  or  partner- 
ship continuing  the  business. 

(3)  Where  a  person  agrees  to  assume  the  existing  obligations  of  a  dis- 
solved partnership,  the  partners  whose  obligations  have  been  assumed  shall 
be  discharged  from  any  liability  to  any  creditor  of  the  partnership  who, 
knowing  of  the  agreement,  consents  to  a  material  alteration  in  the  nature 
or  time  of  payment  of  such  obligations. 

(4)  The  individual  property  of  a  deceased  partner  shall  be  liable  for 
all  obligations  of  the  partnership  incurred  while  he  was  a  partner  but  sub- 
ject to  the  prior  payment  of  his  separate  debts. 

SEC.  37.  [Eight  to  Wind  Up.]  Unless  otherwise  agreed  the  partners 
who  have  not  wrongfully  dissolved  the  partnership  or  the  legal  representa- 
tive of  the  last  surviving  partner,  not  bankrupt,  has  the  right  to  wind  up  the 
partnership  affairs;  provided,  however,  that  any  partner,  his  legal  represen- 
tative or  his  assignee,  upon  cause  shown,  may  obtain  winding  up  by  the 
court. 

SEC.  38.  [Eights  of  Partners  to  Application  of  Partnership  Property.] 
(1)  When  dissolution  is  caused  in  any  way,  except  in  contravention  of  the 
partnership  agreement,  each  partner,  as  against  his  co-partners  and  all  per- 
sons claiming  through  them  in  respect  of  their  interests  in  the  partnership, 
unless  otherwise  agreed,  may  have  the  partnership  property  applied  to  dis- 
charge its  liabilities,  and  the  surplus  applied  to  pay  in  cash  the  net  amount 
owing  to  the  respective  partners.  But  if  dissolution  is  caused  by  expulsion 
of  a  partner,  bona  fide  under  the  partnership  agreement  and  if  the  expelled 
partner  is  discharged  from  all  partnership  liabilities,  either  by  payment 
or  agreement  under  section  36  (2),  he  shall  receive  in  cash  only  the  net 
amount  due  him  from  the  partnership. 

(2)  When  dissolution  is  caused  in  contravention  of  the  partnership 
agreement  the  rights  of  the  partners  shall  be  as  follows: 

(a)     Each  partner   who  has  not  caused  dissolution  wrongfully  shall 

have, 

I.  All  the  rights  specified  in  paragraph  (1)   of  this  section,  and 

II.  The  right,  as  against  each  partner  who  has  caused  the  dissolution 
wrongfully,  to  damages  for  breach  of  the  agreement. 

(&)  The  partners  who  have  not  caused  the  dissolution  wrongfully,  if 
they  all  desire  to  continue  the  business  in  the  same  name,  either  by  them- 
selves or  jointly  with  others,  may  do  so,  during  the  agreed  term  for  the 
partnership  and  for  that  purpose  may  possess  the  partnership  property, 
provided  they  secure  the  payment  by  bond  approved  by  the  court,  or  pay 
to  any  partner  who  has  caused  the  dissolution  wrongfully,  the  value  of 
his  interest  in  the  partnership  at  the  dissolution,  less  any  damages  re- 

427 


APPENDIX  A 

coverable  under  clause    (2aII)    of  this  section,  and  in  like  manner  in- 
demnify him  against  all  present  or  future  partnership  liabilities. 

(c)     A  partner  who  has  caused  the  dissolution  wrongfully  shall  have: 

I.  If   the   business  is   not   continued  under   the   provisions   of   para- 
graph (2Z>)  all  the  rights  of  a  partner  under  paragraph  (1),  subject  to 
clause  (2aII),  of  this  section, 

II.  If  the  business  is  continued  under  paragraph   (26)    of  this  sec- 
tion -the  right  as  against  his  co-partners  and  all  claiming  through  them 
in  respect  of  their  interests  in  the  partnership,  to  have  the  value  of  his 
interest  in  the  partnership,  less  any  damages  caused  to  his  co-partners 
by  the  dissolution,  ascertained  and  paid  to  him  in  cash,  or  the  payment 
secured  by  bond  approved  by  the  court,  and  to  be  released  from  all  exist- 
ing liabilities  of  the  partnership;  but  in  ascertaining  the  value  of  the 
partner's  interest  the  value  of  the  good-will  of  the  business  shall  not 
be  considered. 

SEC.  '39.  [Eights  Where  Partnership  is  Dissolved  for  Fraud  or  Mis- 
representation.] Where  a  partnership  contract  is  rescinded  on  the  ground 
of  the  fraud  or  misrepresentation  of  one  of  the  parties  thereto,  the  party 
entitled  to  rescind  is,  without  prejudice  to  any  other  right,  entitled, 

(a)  To  a  lien  on,  or  right  of  retention  of,  the  surplus  of  the  part- 
nership property  after  satisfying  the  partnership  liabilities  to  third  per- 
sons for  any  sum  of  money  paid  by  him  for  the  purchase  of  an  interest 
in  the  partnership  and  for  any  capital  or  advances  contributed  by  him; 
and 

(6)  To  stand,  after  all  liabilities  to  third  persons  have  been  satis- 
fied, in  the  place  of  the  creditors  of  the  partnership  for  any  payments 
made  by  him  in  respect  of  the  partnership  liabilities;  and 

(c)     To  be  indemnified  by  the  person  guilty  of  the  fraud  or  making 
the  representation  against  all  debts  and  liabilities  of  the  partnership. 
SEO.    40.     [Eules   for   Distribution.]     In    settling  accounts   between   the 
partners  after  dissolution,  the  following  rules  shall  be  observed,  subject  to 
any  agreement  to  the  contrary: 

•  (a)     The  assets  of  the  partnership  are; 

I.  The  partnership  property, 

II.  The  contributions  of  the  partners  necessary  for  the  payment  of  all 
the  liabilities  specified  in  clause  (&)  of  this  paragraph. 

(&)  The  liabilities  of  the  partnership  shall  rank  in  order  of  payment, 
as  follows: 

I.  Those  owing  to  creditors  other  than  partners, 

II.  Those  owing  to  partners  other  than  for  capital  and  profits, 

III.  Those  owing  to  partners  in  respect  of  capital, 

IV.  Those  owing  to  partners  in  respect  of  profits. 

(c)  The  assets  shall  be  applied  in  the  order  of  their  declaration  in 
clause  (a)  of  this  paragraph  to  the  satisfaction  of  the  liabilities. 

(d)  The  partners  shall  contribute,  as  provided  by  section  18  (a)  the 
amount  necessary  to  satisfy  the  liabilities;   but  if  any,  but  not  all,  of 
the  partners  are  insolvent,  or,  not  being  subject  to  process,  refuse  to 

428 


UNIFORM   PARTNERSHIP   ACT 

contribute,  the  other  partners  shall  contribute  their  share  of  the  liabili- 
ties, and,  in  the  relative  proportions  in  which  they  share  the  profits,  the 
additional  amount  necessary  to  pay  the  liabilities. 

(e)  An  assignee  for  the  benefit  of  creditors  or  any  person  appointed 
by  the  court  shall  have  the  right  to  enforce  the  contributions  specified 
in  clause  (d)  of  this  paragraph. 

(/)  Any  partner  or  his  legal  representative  shall  have  the  right  to 
enforce  the  contributions  specified  in  clause  (d)  of  this  paragraph,  to 
the  extent  of  the  amount  which  he  has  paid  in  excess  of  his  share  of  the 
liability. 

(<7)  The  individual  property  of  a  deceased  partner  shall  be  liable  for 
the  contributions  specified  in  clause  (d)  of  this  paragraph. 

(h)  When  partnership  property  and  the  individual  properties  of  the 
partners  are  in  the  possession  of  a  court  for  distribution,  partnership 
creditors  shall  have  priority  on  partnership  property  and  separate  credi- 
tors on  individual  property,  saving  the  rights  of  lien  or  secured  creditors 
as  heretofore. 

(i)  Where  a  partner  has  become  bankrupt  or  his  estate  is  insolvent 
the  claims  against  his  separate  property  shall  rank  in  the  following  order: 

I.  Those  owing  to  separate  creditors, 

II.  Those  owing  to  partnership  creditors, 

III.  Those  owing  to  partners  by  way  of  contribution. 

SEC.  41.     [Liability  of  Persons  Continuing  the  Business  in  Certain  Cases.] 

(1)  When  any  new  partner  is  admitted  into  an  existing  partnership, 
or  when  any  partner  retires  and  assigns  (or  the  representative  of  the  de- 
ceased partner  assigns)   his  rights  in  partnership  property  to  two  or  more 
of  the  partners,  or  to  one  or  more  of  the  partners  and  one  or  more  third  per- 
sons, if  the  business  is  continued  without  liquidation  of  the  partnership 
affairs,  creditors  of  the  first  or  dissolved  partnership  are  also  creditors  of 
the  partnership  so  continuing  the  business. 

(2)  When  all  but  one  partner  retire  and  assign  (or  the  representative 
of  a  deceased  partner  assigns)  their  rights  in  partnership  property  to  the 
remaining  partner,  who  continues  the  business  without  liquidation  of  part- 
nership affairs,  either  alone  or  with  others,  creditors  of  the  dissolved  part- 
nership are  also  creditors  of  the  person  or  partnership  so  continuing  the 
business. 

(3)  When  any  partner  retires  or  dies  and  the  business  of  the  dissolved 
partnership  is  continued  as  set  forth  in  paragraphs   (1)   and   (2)    of  this 
section,  with  the  consent  of  the  retired  partners  or  the  representative  of 
the  deceased  partner,  but  without  any  assignment  of  his  right  in  partner- 
ship property,  rights  of  creditors  of  the  dissolved  partnership  and  of  the 
creditors  of  the  person  or  partnership  continuing  the  business  shall  be  as 
if  such  assignment  had  been  made. 

(4)  When  all  the  partners  or  their  representatives  assign  their  rights  in 
partnership  property  to  one  or  more  third  persons  who  promise  to  pay  the 
debts  and  who  continue  the  business  of  the  dissolved  partnership,  creditors 

429 


APPENDIX   A 

of  the  dissolved  partnership  are  also  creditors  of  the  person  or  partnership 
continuing  the  business. 

(5)  When  any  partner  wrongfully  causes  a  dissolution  and  the  remain- 
ing partners  continue  the  business  under  the  provisions  of  section  38  (2&), 
either  alone  or  with  others,  and  without  liquidation  of  the  partnership  af- 
fairs, creditors  of  the  dissolved  partnership  are  also  creditors  of  the  person 
or  partnership  continuing  the  business. 

(6)  When  a  partner  is  expelled  and  the  remaining  partners  continue 
the  business  either  alone  or  with  others,  without  liquidation  of  the  part- 
nership affairs,  creditors  of  the  dissolved  partnership  are  also  creditors  of 
the  person  or  partnership  continuing  the  business. 

(7)  The  liability  of  a  third  person  becoming  a  partner  in  the  partner- 
ship continuing  the  business,  under  this  section,  to  the  creditors  of  the  dis- 
solved partnership  shall  be  satisfied  out  of  partnership  property  only. 

(8)  When  the  business  of  a  partnership  after  dissolution  is  continued 
under  any  conditions  set  forth  in  this  section  the  creditors  of  the  dissolved 
partnership,  as  against  the  separate  creditors  of  the  retiring  or  deceased 
partner  or  the  representative  of  the  deceased  partner,  have  a  prior  right 
to  any  claim  of  the  retired  partner  or  the  representative  of  the  deceased 
partner  against  the  person  or  partnership  continuing  the  business,  on  ac- 
count of  the  retired  or  deceased  partner's  interest  in  the  dissolved  part- 
nership or  on  account  of  any  consideration  promised  for  such  interest  or 
for  hia  right  in  partnership  property. 

(9)  Nothing  in  this  section  shall  be  held  to  modify  any  right  of  credi- 
tors to  set  aside  any  assignment  on  the  ground  of  fraud. 

(10)  The  use  by  the  person  or  partnership  continuing  the  business  of 
the  partnership  name,  or  the  name  of  a  deceased  partner  as  part  thereof, 
shall  not  of  itself  make  the  individual  property  of  the  deceased  partner 
liable  for  any  debts  contracted  by  such  person  or  partnership. 

SEC.  42.  [Eights  of  Eetiring  or  Estate  of  Deceased  Partner  When  the 
Business  is  Continued.]  When  any  partner  retires  or  dies,  and  the  busi- 
ness is  continued  under  any  of  the  conditions  set  forth  in  section  41  (1,  2, 
3,  5,  6),  or  section  38  (2&),  without  any  settlement  of  accounts  as  between 
him  or  his  estate  and  the  person  or  partnership  continuing  the  business, 
unless  otherwise  agreed,  he  or  his  legal  representative  as  against  such  per- 
sons or  partnership  may  have  the  value  of  his  interest  at  the  date  of  dis- 
solution ascertained,  and  shall  receive  as  an  ordinary  creditor  an  amount 
equal  to  the  value  of  his  interest  in  the  dissolved  partnership  with  inter- 
est, or,  at  his  option  or  at  the  option  of  his  legal  representative,  in  lieu- 
of  interest,  the  profits  attributable  to  the  use  of  his  right  in  the  property 
of  the  dissolved  partnership;  provided  that  the  creditors  of  the  dissolved 
partnership  as  against  the  separate  creditors,  or  the  representative  of  the 
retired  or  deceased  partner,  shall  have  priority  on  any  claim  arising  under 
this  section,  as  provided  by  section  41  (8J  of  this  act. 

Szo.  43.  [Accrual  of  Actions.]  The  right  to  an  account  of  his  interest 
shall  accrue  to  any  partner,  or  his  legal  representative,  as  against  the  wind- 
ing up  partners  or  the  surviving  partners  or  the  person  or  partnership  con- 

430 


UNIFORM    PARTNERSHIP   ACT 

tinuing  the  business,  at  the  date  of  dissolution  in  the  absence  of  any  agree- 
ment to  the  contrary. 

PAET  VII. 
MISCELLANEOUS  PKOVISIONS. 

SEC.  44.  [When  Act  Takes  Effect.]  This  act  shall  take  effect  on  the 
day  of one  thousand  nine  hundred  and 

SEC.  45.  [Legislation  Kepealed.]  All  acts  or  parts  of  acts  inconsistent 
with  this  act  are  hereby  repealed. 


431 


UNIFORM  LIMITED  PARTNERSHIP  ACT 

SECTION  1.  [Limited  Partnership  Defined.]  A  limited  partnership  is  a 
partnership  formed  by  two  or  more  persons  under  the  provisions  of  Section 
2,  having  as  members  one  or  more  general  partners  and  one  or  more  limited 
partners.  The  limited  partners  as  such  shall  not  be  bound  by  the  obliga- 
tions of  the  partnership. 

SEC.  2.  [Formation.]  (1)  Two  or  more  persons  desiring  to  form  a 
limited  partnership  shall 

(a)     Sign  and  swear  to  a  certificate,  which  shall  state 

I.    The  name  of  the  partnership, 
II.     The  character  of  the  business, 

III.  The  location  of  the  principal  place  of  business, 

IV.  The  name  and  place  of  residence  of  each  member;    general  and 
limited  partners  being  respectively  designated. 

V.     The  term  for  which  the  partnership  is  to  exist, 
VI.     The  amount  of  cash  and  a  description  of  and  the  agreed  value 

of  the  other  property  contributed  by  each  limited  partner, 
VII.     The  additional  contributions,  if  any,  agreed  to  be  made  by  each 

limited  partner  and  the  times  at  which  or  events  on  the  happening  of 

which  they  shall  be  made, 
VIII.     The  time,  if  agreed  upon,  when  the  contribution  of  each  limited 

partner  is  to  be  returned. 

IX.     The  share  of  the  profits  or  the  other  compensation  by  way  of 

income   which    each    limited   partner    shall    receive    by    reason   of    his 

contribution, 

X.     The  right,  if  given,  of  a  limited  partner  to  substitute  an  assignee 

as    contributor    in   his   place,   and   the    terms    and    conditions    of    the 

substitution, 
XI.     The  right,  if  given,  of  the  partners  to  admit  additional  limited 

partners, 
XII.     The  right,  if  given,  of  one  or  more  of  the  limited  partners  to 

priority  over  other  limited  partners,  as  to  contributions  or  as  to  com- 
pensation by  way  of  income,  and  the  nature  of  such  priority, 

XIII.  The  right,  if  given,  of  the  remaining  general  partner  or  partners 
to  continue   the  business  on  the  death,   retirement   or   insanity   of  a 
general  partner,  and 

XIV.  The  right>  if  given,  of  a  limited  partner  to  demand  and  receive 
property  other  than  cash  in  return  for  his  contribution. 

(&)     File  for  record  the  certificate  in  the  office  of  [here  designate  the 
proper  office], 

432 


UNIFORM   LIMITED  PARTNERSHIP  ACT 

(2)  A.  limited  partnership  is  formed  if  there  has  been  substantial  com- 
pliance in  good  faith  with  the  requirements  of  paragraph  (1). 

SEC.  3.  [Business  Which  May  Be  Carried  On.]  A  limited  partner- 
ship may  carry  on  any  business  which  a  partnership  without  limited  part- 
ners may  carry  on,  except  [here  designate  the  business  to  be  prohibited]. 

SEC.  4.  [Character  of  Limited  Partner's  Contribution.]  The  contribu- 
tions of  a  limited  partner  may  be  cash  or  other  property,  but  not  services. 

SEC.  5.  [A  Name  Not  To  Contain  Surname  of  Limited  Partner;  Ex- 
ceptions.] (1)  The  surname  of  a  limited  partner  shall  not  appear  in 
the  partnership  name,  unless 

(a)     It  is  also  the  surname  of  a  general  partner,  or 

(6)     Prior   to   the  time  when   the   limited  partner  became    such   the 

business  had  been  carried  on  under  a  name  in  which  his  surname  ap- 
peared. 

(2)  A  limited  partner  whose  name  appears  in  a  partnership  name 
contrary  to  the  provisions  of  paragraph  (1)  is  liable  as  a  general  partner 
to  partnership  creditors  who  extend  credit  to  the  partnership  without 
actual  knowledge  that  he  is  not  a  general  partner. 

SEC.  6.  [Liability  for  False  Statements  in  Certificate.]  If  the  cer- 
tificate contains  a  false  statement,  one  who  suffers  loss  by  reliance  on  sucti1 
statement  may  hold  liable  any  party  to  the  certificate  who  knew  the  state- 
ment to  be  false. 

(a)     At  the '  time  he  signed  the  certificate,  or 

(6)     Subsequently,  but  within  a  sufficient  time  before  the  statement 

•was  relied  upon  to  enable  him  to  cancel  or  amend  the  certificate,  or  to 

file  a  petition  for  its  cancellation  or  amendment  as  provided  in  Section 

25  (3). 

SEC.  7.  [Limited  Partner  Not  Liable  to  Creditors.]  A  limited  partner 
shall  not  become  liable  as  a  general  partner  unless,  in  addition  to  the 
exercise  of  his  rights  and  powers  as  a  limited  partner,  he  takes  part  in 
the  control  of  the  business.  , 

SEC.  8.  [Admission  of  Additional  Limited  Partners.]  After  the  form- 
ation of  a  limited  partnership,  additional  limited  partners  may  be  ad- 
mitted upon  filing  an  amendment  to  the  original  certificate  in  accordance 
with  the  requirements  of  Section  25. 

SEC.  9.  [Eights,  Powers  and  Liabilities  of  a  General  Partner.]  (1) 
A  general  partner  shall  have  all  the  rights  and  powers  and  be  subject  to 
all  the  restrictions  and  liabilities  of  a  partner  in  a  partnership  without 
limited  partners,  except  that  without  the  written  consent  or  ratification 
of  the  specific  act  by  all  the  limited  partners,  a  general  partner  or  all  of 
the  general  partners  have  no  authority  to 

(a)     Do  any  act  in  contravention  of  the  certificate, 

(&)     Do   any  act  which  would  make  it  impossible  to  carry  on  the 

ordinary  business  of  the  partnership, 

(c)  Confess  a  judgment  against  the  partnership, 

(d)  Possess  partnership  property,  or  assign  their  rights  in  specific 
partnership  property,  for  other  than  a  partnership  purpose, 

Mech.  Part.— 28  433 


APPENDIX  A 

(e)     Admit  a  person  as  a  general  partner, 

(/)  Admit  a  person  as  a  limited  partner,  unless  the  right  so  to  de 
is  given  in  the  certificate, 

(g)  Continue  the  business  with  partnership  property  on  the  death, 
retirement  or  insanity  of  a  general  partner,  unless  the  right  so  to  do  is 
given  in  the  certificate. 

SEC.  10.  [Eights  of  a  Limited  Partner.]  (1)  A  limited  partner  shall 
have  the  same  rights  as  a  general  partner  to 

(a)  Have  the  partnership  books  kept  at  the  principal  place  of  busi- 
ness of  the  partnership,  and  at  all  times  to  inspect  and  copy  any  of 
them, 

(6)     Have   on  demand  true   and  full  information  of  all  things  af- 
fecting the  partnership,   and  a  formal   account  of  partnership   affairs 
whenever  circumstances  render  it  just  and  reasonable,  and 
(0)     Have  dissolution  and  winding  up  by  decree  of  court. 
(2)     A  limited  partner  shall  have  the  right  to  receive  a  share  of  the 
profits   or  other   compensation  by  way   of  income,  and   to   the   return  of 
his  contribution  as  provided  in  Sections  15  and  16. 

SEC.  11.  [Status  of  Person  Erroneously  Believing  Himself  a  Limited 
Partner.]  A  person  who  has  contributed  to  the  capital  of  a  business  con- 
ducted by  a  person  or  partnership  erroneously  believing  that  he  has  become 
a  limited  partner  in  a  limited  partnership,  is  not,  by  reason  of  his  exercise 
of  the  rights  of  a  limited  partner,  a  general  partner  with  the  person  or  in 
the  partnership  carrying  on  the  business,  or  bound  by  the  obligations  of 
such  person  or  partnership;  provided  that  on  ascertaining  the  mistake  he 
promptly  renounces  his  interest  in  the  profits  of  the  business,  or  other 
compensation  by  way  of  income. 

SEC.  12.  [One  Person  both  General  and  Limited  Partner.]  (1)  A  per- 
son may  be  a  general  partner  and  a  limited  partner  in  the  same  partnership 
at  the  same  time. 

(2)  A  person  who  is  a  general,  and  also  at  the  same  time  a  limited 
partner,  shall  have  all  the  rights  and  powers  and  be  subject  to  all  the 
restrictions  of  a  general  partner;  except  that,  in  respect  to  his  contribu- 
tion, he  shall  have  the  rights  against  the  other  members  which  he  would 
have  had  if  he  were  not  also  a  general  partner. 

-  SEC.  13.  [Loans  and  Other  Business  Transactions  with  Limited  Part- 
ner.! (1)  A  limited  partner  also  may  loan  money  to  and  transact  other 
business  with  the  partnership,  and,  unless  he  is  also  a  general  partner,  re- 
ceive on  account  of  resulting  claims  against  the  partnership,  with  general 
creditors,  a  pro  rata  share  of  the  assets.  No  limited  partner  shall  in 
respect  to  any  such  claim 

(a)  Receive  or  hold  as  collateral  security  any  partnership  property, 
or 

(ft)  Receive  from  a  general  partner  or  the  partnership  any  payment, 
conveyance,  or  release  from  liability,  if  at  the  time  the  assets  of  the 
partnership  are  not  sufficient  to  discharge  partnership  liabilities  to  per- 
sons not  claiming  as  general  or  limited'partners, 

434  •      •  '  .  -  •  • 


UNIFORM  LIMITED  PARTNERSHIP  ACT 

(2)  The  receiving  of  collateral  security,  or  a  payment,  conveyance,  or 
release  in  violation  of  the  provisions  of  paragraph  (1)  is  a  fraud  on  the 
creditors  of  the  partnership. 

SEC.  14.  [Belation  of  Limited  Partners  Inter  8e.]  Where  there  ar« 
several  limited  partners  the  members  may  agree  that  one  or  more  of  the 
limited  partners  shall  have  a  priority  over  other  limited  partners  as  to 
the  return  of  their  contributions,  as  to  their  compensation  by  way  of  in- 
come, or  as  to  any  other  matter.  If  such  an  agreement  is  made  it  shall 
be  stated  in  the  certificate,  and  in  the  absence  of  such  a  statement  all  the 
limited  partners  shall  stand  upon  equal  footing. 

SEO.  15.  [Compensation  of  Limited  Partner.]  A  limited  partner  may 
receive  from  the  partnership  the  share  of  the  profits  or  the  compensation 
by  way  of  income  stipulated  for  in  the  certificate;  provided,  that  after 
such  payment  is  made,  whether  from  the  property  of  the  partnership  or 
that  of  a  general  partner,  the  partnership  assets  -are  in  excess  of  all 
liabilities  of  the  partnership  except  liabilities  to  limited  partners  on 
account  of  their  contributions  and  to  general  partners. 

SEC.  16.  [Withdrawal  or  Eeduction  of  Limited  Partner's  Contribu- 
tion.] (1)  A  limited  partner  shall  not  receive  from  a  general  partner 
or  out  of  partnership  property  any  part  of  his  contribution  until 

(a)  All  liabilities    of  the  partnership,   except  liabilities   to   general 
partners  and  to  limited  partners  on  account  of  their  contributions,  have 
been  paid  or  there  remains  property  of  the  partnership  sufficient  to  pay 
them, 

(b)  The   consent   of   all  members  is  had,  unless  the  return  of  the" 
contribution  may  be  rightfully  demanded  under  the  provisions  of  para- 
graph (2),  and 

(c)  The  certificate  is  cancelled  or  so  amended  as  to  set  forth  the 
withdrawal  or  reduction. 

(2)  Subject  to  the  provisions  of  paragraph  (1)  a  limited  partner  may 
rightfully  demand  the  return   of  his  contribution 

(a)     On  the  dissolution  of  a  partnership,  or 

(&)  When  the  date  specified  in  the  certificate  for  its  return  has 
arrived,  or 

(c)  After  he  has  given  six  months'  notice  in  writing  to  all  other 
members,  if  no  time  is  specified  in  the  certificate  either  for  the  return 
of  the  contribution  or  for  the  dissolution  of  the  partnership, 

(3)  In  the  absence  of  any  statement  in  the  certificate  to  the  contrary 
or  the  consent  of  all  members,  a  limited  partner,  irrespective  of  the  nature 
of  his   contribution,  has   only  the  right  to   demand  and  receive  cash  in 
return  for  his  contribution. 

(4)  A   limited   partner  may   have   the   partnership   dissolved   and   its 
affairs  wound  up  when 

(a)  He  rightfully  but  unsuccessfully  demands  the  return  o£  his 
contribution,  or 

(&)  The  other  liabilities  of  the  partnership  have  not  been  paid,  or 
the  partnership  property  is  insufficient  for  their  payment  as  required 

435 


APPENDIX   A 

by  paragraph  (la)   and  the  limited  partner  would  otherwise  be  entitled 
to  the  return  of  his  contribution. 

SEC.  17.  [Liability  of  Limited  Partner  to  Partnership.]  (1)  A  lim- 
ited partner  is  liable  to  the  partnership 

(a)  For  the  difference  between  his  contribution  as  actually  made 
and  that  stated  in  the  certificate  as  having  been  made,  and 

(&)  For  any  unpaid  contribution  which  he  agreed  in  the  certificate 
to  make  in  the  future  at  the  time  and  on  the  conditions  stated  in  the 
certificate. 

(2)  A  limited  partner  holds  as  trustee  for  the  partnership 

(a)  Specific  property  stated  in  the  certificate  as  contributed  by  him, 
but  which  was  not  contributed  or  which  has  been  wrongfully  returned, 
and 

(6)  Money  or  other  property  wrongfully  paid  or  conveyed  to  him 
on  account  of  his  contribution. 

(3)  .    The  liabilities  of  a  limited  partner  as  set  forth  in  this  section  can 
be  waived   or  compromised  only  by  the  consent   of  all  members;    but  a 
waiver  or  compromise  shall  not  affect  the  right  of  a  creditor  of  a  partner- 
ship, who  extended  credit  or  whose  claim  arose  after  the  filing  and  before 
a  cancellation  or  amendment  of  the  certificate,  to  enforce  such  liabilities. 

(4)  When  a  contributor   has  rightfully   received  the  return   in  whole 
or  in  part  of  the  capital  of  his  contribution,  he  is  nevertheless  liable  to 
the  partnership  for  any  sum,  not  in  excess  of  such  return  with  interest, 
necessary  to  discharge  its  liabilities  to  all  creditors  who  extended  credit 
or  whose  claims  arose  before  such  return. 

SEO.  18.  [Nature  of  Limited  Partner's  Interest  in  Partnership.]  A 
limited  partner's  interest  in  the  partnership  is  personal  property. 

SEC.  19.  [Assignment  of  Limited  Partner^  Interest.]  (1)  A  limited 
partner's  interest  is  assignable. 

(2)  A  substituted  limited  partner  is  a  person  admitted  to  all  the  rights 
of  a  limited  partner  who  has  died  or  has  assigned  his  interest  in  a  part- 
nership. 

(3)  An  assignee,  who  does  not  become  a  substituted  limited  partner, 
has  no   right   to   require   any   information   or   account   of   the  partnership 
transactions  or  to  inspect  the  partnership  books;    he  is  only  entitled  to 
receive  the  share  of  the  profits  or  other  compensation  by  way  of  income,  or 
the  return  of  his  contribution,  to  which  his  assignor  would  otherwise  be 
entitled.  .  , 

(4)  An  assignee  shall  have  the  right  to  become  a  substituted  limited 
partner  if  all  the  members    (except  the  assignor)    consent  thereto   or   if 
the    assignor,    being    thereunto    empowered    by '  the    certificate,    gives    the 
assignee  that  right. 

(5)  An  assignee  becomes  a  substituted  limited  partner  when  the  cer- 
tificate is  appropriately  amended  in  accordance  with  Section  25. 

(6)  The  substituted  limited  partner  has  all  the  rights  and  powers,  and 
is  subject  to  all  the  restrictions  and  liabilities  of  his  assignor,  except  those 

436 


UNIFORM  LIMITED  PARTNERSHIP  ACT 

liabilities  of  which  he  was  ignorant  at  the  time  he  became  a  limited  partnwr 
and  which  could  not  be  ascertained  from  the  certificate. 

(7)  The  substitution  of  the  assignee  as  a  limited  partner  does  not 
release  the  assignor  from  liability  to  the  partnership  under  Sections  6 
and  17. 

SEC.  20.  [Effect  of  Eetirement,  Death  or  Insanity  of  a  General  Part- 
ner.] The  retirement,  death  or  insanity  of  a  general  partner  dissolves 
the  partnership,  unless  the  business  is  continued  by  the  remaining  general 
partners 

(a)     Under  a  right  so  to  do  stated  in  the  certificate,  or 
(6)     With  the  consent  of  all  members. 

SEC.  21.  [Death  of  Limited  Partner.]  (1)  On  the  death  of  a  limited 
partner  his  executor  or  administrator  shall  have  all  the  rights  of  a  limited 
partner  for  the  purpose  of  settling  his  estate,  and  such  power  as  the  de- 
ceased had  to  constitute  his  assignee  a  substituted  limited  partner. 

(2)  The  estate  of  a  deceased  limited  partner  shall  be  liable  for  all 
his  liabilities  as  a  limited  partner. 

SEC.  22.  [Eights  of  Creditors  of  Limited  Partner.]  (1)  On  due 
application  to  a  court  of  competent  jurisdiction  by  any  judgment  creditor 
of  a  limited  partner,  the  court  may  charge  the  interest  of  the  indebted 
limited  partner  with  payment  of  the  unsatisfied  amount  of  the  judgment 
debt;  and  may  appoint  a  receiver,  and  make  all  other  orders,  directions, 
and  inquiries  which  the  circumstances  of  the  case  may  require. 

(2)  The  interest  may  be  redeemed  with  the  separate  property  of  any 
general  partner,  but  may  not  be  redeemed  with  partnership  property. 

(3)  The  remedies  conferred  by  paragraph    (1)    shall  not   be   deemed 
exclusive  of  others  which  may  exist. 

(4)  Nothing  in  this  act  shall  be  held  to  deprive  a  limited  partner  of 
his  statutory  exemption. 

SEC.  23.  [Distribution  of  Assets.]  (1)  In  settling  accounts  after 
dissolution  the  liabilities  of  the  partnership  shall  be  entitled  to  payment 
in  the  following  order: 

(a)  Those  to  creditors,  in  the  order  of  priority  as  provider!  by  law, 
except  those  to  limited  partners  on  account  of  their  contributions,  and 
to  general  partners, 

(ft)  Those  to  limited  partners  in  respect  to  their  share  of  the  profits 
and  other  compensation  by  way  of  income  on  their  contributions, 

(c)  Those   to   limited    partners    in   respect    to    the    capital   of   their 
contributions, 

(d)  Those  to  general  partners  other  than  for  capital  and  profits, 

(e)  Those  to  general  partners  in  respect  to  profits, 
(/)     Those  to  general  partners  in  respect  to  capital. 

(2)  Subject  to  any  statement  in  the  certificate  or  to  subsequent  agree- 
ment, limited  partners  share  in  the  partnership  assets  in  respect  to  their 
claims  for  capital,  and  in  respect  to  their  claims  for  profits  or  for  com- 
pensation by  way  of  income  on  their  contributions  respectively,  in  pro- 
portion to  the  respective  amounts  of  such  claims. 

437 


APPENDIX  A 

SEC.  24.  [When  Certificate  Shall  be  Cancelled  or  Amended.]  (1) 
The  certificate  shall  be  cancelled  when  the  partnership  is  dissolved  or  all 
limited  partners  cease  to  be  such. 

(2)     A  certificate  shall  be  amended  when 

(a)     There  is  a  change  in  the  name   of  the  partnership   or  in  the 
amount  or  character  of  the  contribution    of  any  limited  partner, 
(6)     A  person  is  substituted  as  a  limited  partner, 
(o)     An  additional  limited  partner  is  admitted, 

(d)  A  person  is  admitted  as  a  general  partner, 

(e)  A  general  partner  retires,  dies  or  becomes  insane,  and  the  busi- 
ness is  continued  under  Section  20. 

(/)  There  is  a  change  in  the  character  of  the  business  of  the  part- 
nership, 

(g)     There  is  a  false  or  erroneous  statement  in  the  certificate, 

(ft)  There  is  a  change  in  the  time  as  stated  in  the  certificate  for 
the  dissolution  of  the  partnership  or  for  the  return  of  a  contribution, 

(t)  A  time  is  fixed  for  the  dissolution  of  the  partnership,  or  the 
return  of  a  contribution,  no  time  having  been  specified  in  the  certificate, 
or 

(j)  The  members  desire  to  make  a  change  in  any  other  statement 
in  the  certificate  in  order  that  it  shall  accurately  represent  the  agree- 
ment between  them. 

SEC.  25.  [Requirements  for  Amendment  and  for  Cancellation  of  Cer- 
tificate.] (1)  The  writing  to  amend  a  certificate  shall 

(a)     Conform  to  the  requirements  of  Section  2   (la)   as  far  as  nec- 
essary to  set  forth  clearly  the  change  in  the  certificate  which  it  is  de- 
•  sired  to  make,  and 

(6)  Be  signed  and  sworn  to  by  all  members,  and  an  amendment 
substituting  a  limited  partner  or  adding  a  limited  or  general  partner 
shall  be  signed  also  by  the  member  to  be  substituted  or  added,  and 
when  a  limited  partner  is  to  be  substituted,  the  amendment  shall  also 
be  signed  by  the  assigning  limited  partner. 

(2)  The  writing  to  cancel  a  certificate  shall  be  signed  by  all  members. 

(3)  A  person  desiring  the  cancellation  or  amendment  of  a  certificate, 
if  any  person   designated  in  paragraphs    (1)    and    (2)    as  a  person  who 
must  execute  the  writing  refuses  to  do  so,  may  petition  the  [here  designate 
the  proper  court]  to  direct  a  cancellation  or  amendment  thereof. 

(4)  If  the  court  finds  that  the  petitioner  has  a  right  to  have  the  writ- 
ing executed  by  a  person  who  refuses  to  do  so,  it  shall  order  the   [here 
designate  the   responsible   official   in  the   office    designated   in   Section   2] 
in  the  office  where  the   certificate   is  recorded  to  record  the  cancellation 
or  amendment  of  the  certificate;  and  when  the  certificate  is  to  be  amended, 
the  court  shall  also  cause  to  be  filed  for  record  in  said  office  a  certified 
copy  of  its  decree  setting  forth  the  amendment. 

(5)  A  certificate  is  amended  or  cancelled  when  there  is  filed  for  record 
in  the  office  [here  designate  the  office  designated  in  Section  2]  where  the 
certificate  is  recorded 

438 


UNIFORM  LIMITED  PARTNERSHIP  ACT 

(a)     A  writing  in  accordance  with  the  provisions  of  paragraph   (1), 

or  (2)  or 

(&)     A  certified  copy  of  the  order  of  court  in  accordance  with  the 

provisions  of  paragraph  (4). 

(6)  After  the  certificate  is  duly  amended  in  accordance  with  this  sec- 
tion, the  amended  certificate  shall  thereafter  be  for  all  purposes  the  cer- 
tificate provided  for  by  this  act. 

SEC.  26.  [Parties  to  Actions.]  A  contributor,  unless  he  is  a  general 
partner,  is  not  a  proper  party  to  proceedings  by  or  against  a  partnership, 
except  where  the  object  is  to  enforce  a  limited  partner's  right  against 
or  liability  to  the  partnership. 

SEC.  27.  [Name  of  Act.]  This  act  may  be  cited  as  The  Uniform 
Limited  Partnership  Act. 

SEO.  28.  [Rules  of  Construction.]  (1)  The  rule  that  statutes  in 
derogation  of  the  common  law  are  to  be  strictly  construed  shall  have  no 
application  to  this  act. 

(2)  This   act  shall  be   so  interpreted  and  construed   as  to  effect  its 
general  purpose  to  make  uniform  the  law  of  those  states  which  enact  it. 

(3)  This  act  shall  not  be  so  construed  as  to  impair  the  obligations  of 
any  contract  existing  when  the  act  goes  into  effect,  nor  to  affect  any  action 
on  proceedings  begun  or  right  accrued  before  this  act  takes  effect. 

SEC.  29.  [Eules  for  Cases  not  Provided  for  in  this  Act.]  In  any  case 
not  provided  for  in  this  act  the  rules  of  law  and  equity,  including  the  law 
merchant,  shall  govern. 


439 


UNIFORM  FRAUDULENT  CONVEYANCE  ACT 

The  following  provisions  apply  particularly  to  Partnerships. 

SEO.  2.  (2)  In  determining  whether  a  partnership  is  insolvent, 
there  shall  be  added  to  the  partnership  property  the  present  fair  salable 
value  of  the  separate  assets  of  each  general  partner  in  excess  of  the  amount 
probably  sufficient  to  meet  the  claims  of  his  separate  creditors,  and  also 
the  amount  of  any  unpaid  subscription  to  the  partnership  of  each  limited 
partner,  provided  the  present  fair  salable  value  of  the  assets  of  such  lim- 
ited partner  is  probably  sufficient  to  pay  his  debts,  including  such  unpaid 
subscription. 

SEO.  8.  Every  conveyance  of  partnership  property,  and  every  partner- 
ship obligation  incurred,  when  the  partnership  is,  or  will  be  thereby  ren- 
dered insolvent,  is  fraudulent  as  to  partnership  creditors,  if  the  conveyance 
is  made  or  obligation  is  incurred 

(a)-    To  a  partner,  whether  with  or  without  a  promise  by  him  to  pay 
partnership  debts,  or 

(b)     To  a  person  not  a  partner  without  fair  consideration  to  the  part- 
nership as  distinguished  from  consideration  to  the  individual  partners. 


440 


BANKRUPTCY  ACT  OF  1898 

V 

SEC.  5.  PARTNERS. — (a)  A  partnership,  during  the  continuation  of  the 
partnership  business,  or  after  its  dissolution  and  before  the  final  settlement 
thereof,  may  be  adjudged  a  bankrupt. 

(&)  The  creditors  of  the^  partnership  shall  appoint  the  trustee;  in  other 
respects  so  far  as  possible  the  estate  shall  be  administered  as  herein  provided 
for  other  estates. 

(c)  The  court  of  bankruptcy  which  has  jurisdiction  of  one  of  the  part- 
ners may  have  jurisdiction  of  all  the  partners  and  of  the  administration  of 
the  partnership  and  individual  property. 

(d)  The  trustee  shall  keep  separate  accounts  of  the  partnership  property 
and  of  the  property  belonging  to  the  individual  partners. 

(e)  The  expenses  shall  be  paid  from  the  partnership  property  and  the 
individual  property  in  such  proportions  as  the  court  shall  determine. 

(/)  The  net  proceeds  of  the  partnership  property  shall  be  appropriated 
to  the  payment  of  the  partnership  debts,  and  the  net  proceeds  of  the  indi- 
vidual estate  of  each  partner  to  the  payment  of  his  individual  debts. 
Should  any  surplus  remain  of  the  property  of  any  partner  after  paying 
his  individual  debts,  such  surplus  shall  be  added  to  the  partnership  assets 
and  be  applied  to  the  payment  of  the  partnership  debts.  Should  any  sur- 
plus of  the  partnership  property  remain  after  paying  the  partnership  debts, 
such  surplus  shall  be  added  to  the  assets  of  the  individual  partners  in  the 
proportion  of  their  respective  interests  in  the  partnership. 

(g)  The  court  may  permit  the  proof  of  the  claim  of  the  partnership 
estate  against  the  individual  estates,  and  vice  versa,  and  may  marshal  the 
assets  of  the  partnership  estate  and  individual  estates  so  as  to  prevent 
preferences  and  secure  the  equitable  distribution  of  the  property  of  the 
several  estates. 

(h)  In  the  event  of  one  or  more  but  not  all  of  the  members  of  a  part- 
nership being  adjudged  bankrupt,  the  partnership  property  shall  not  be 
administered  in  bankruptcy,  unless  by  consent  of  the  partner  or  partners 
not  adjudged  bankrupt;  but  such  partner  or  partners  not  adjudged  bank- 
rupt shall  settle  the  partnership  business  as  expeditiously  as  its  nature 
will  permit,  and  account  for  the  interest  of  the  partner  or  partners  adjudged 
bankrupt. 


441 


APPENDIX  B 


PARTNERSHIP  FORMS 

The  following  simple  form  may  prove  suggestive.  It  is  divided  into  dis- 
tinct clauses,  to  a  greater  extent  than  might  otherwise  be  thought  advisable, 
in  order  to  give  prominence  to  each.  A  great  variety  of  special  clauses, 
not  here  included,  are  in  use  in  special  cases. 

AETICLES  OF  PAETNEKSHIP. 

This  agreement,  made  this  first  day  of  January,  1920,  between  Adam 
Smith,  Edwin  Arnold  and  Eobert  Burns,  all  of  the  city  of  Chicago,  county 
of  Cook,  and  state  of  Illinois,  witnesseth: 

1.  The  said  parties  hereby  agree  that  they  will  become  and  be  partners 
in  business  for  the  purpose  and  upon  the  terms  hereinafter  stated. 

2.  The  firm  name  of  the  partnership  shall  be  Adam  Smith  &  Company. 

3.  The  business  to  be  carried  on  by  said  partnership  is  that  of  buying 
and  selling  dry  goods  at  wholesale  and  retail,  and  carrying  on  a  general 
dry  goods  business. 

4.  The  place  at  which  the  said  partnership  is  to  be  carried  on  is  the  said 
city  of  Chicago. 

5.  The  term  for  which  the  said  partnership  is  organized  is  ten  years 
from  and  after  February  1,  1920. 

6.  The  capital  of  said  firm  is  to  be  the  sum  of  $150,000,  of  which  each, 
of  the  said  partners  is  to  contribute  one-third  part  in  cash,  on  or  before 
February  15,  1920,  and  they  are  to  share  in  the  profits  and  losses  of  said 
business  in  the  same  proportion. 

7.  Each  of  said  partners  is  to  give  his  undivided  time  and  attention  to 
the  said  business,  and  is  to  use  his  utmost  endeavors  to1  promote  the  inter- 
ests of  the    said  firm. 

8.  Books  of  account  of  the  transactions  of  said  partnership  shall  be 
kept  at  the  place  of  business,  and  shall  be  at  all  times  open  to  inspection 
by  any  partner.     Each  partner  shall  cause  to  be  entered  upon  said  books 
a  just  and  true  account  of  all  his  dealings,  receipts  and  expenditures  for 
or  on  account  of  said  firm. 

9.  In  the  month  of  January  in  each  year,  a  full  and  complete  inven- 
tory of  stock  shall  be  taken,  and  a  complete  statement  of  the  condition  of 
said  partnership  shall  be  made,  and  an  accounting  between  the  said  partners 

443 


APPENDIX  B 

shall  be  had,  and  the  profits  or  losses  of  the  preceding  year  shall  then  be 
divided  and  paid  or  contributed.    The  fiscal  year  shall  begin  on  February  1. 

10.  Each  of  said  partners  shall  be  permitted  to  draw  from  the  funds 
of  said  firm  the  sum  of  $100  per  week  for  his  living  expenses.     Such  sums 
so  drawn  shall  be  charged  to  him,  and  at  the  annual 'accounting  shall  be 
charged  against  his  share  of  the  profits.     If  his  share  of  the  profits  shall 
not  be  equal  to  the  sum  so  drawn,  he  shall  at  once  pay  the  deficiency  into 
the  said  firm.    Such  deficiency  shall  draw  interest  at  six  per  cent,  until  paid. 

11.  Neither  of  said  partners  shall,  without  the  consent  of  the  others, 
compromise  or  release  debts  except  upon  full  payment  thereof,  or  engage  in 
any  unusual  transaction,  or  make  any  contract  on  the  partnership  account 
involving  more  than  $1000;  or  use  the  firm's  name,  credit  or  property  for 
other  than  partnership  purposes;   or  sign  or  indorse  negotiable  paper  or 
become  surety  for  third  persons;  or  engage  in  any  speculation;   or  know- 
ingly do  any  act  by  which  the  interests  of  said  partnership  shall  be  im- 
periled or  prejudiced. 

12.  All  questions  of  difference  as  to  the  management  of  the  business 
shall  be  decided  by  a  majority  of  said  partners,  and  no  partner  shall  know- 
ingly do  any  act  in  relation  thereto  contrary  to  the  decision  of  the  majority. 

13.  Either  of  said  partners  may  retire  from  the  said  partnership  at  the 
expiration  of  any  fiscal  year  upon  giving  his  said  partners  three  months' 
notice  of  his  intention  so  to  do. 

14.  Upon  the  dissolution  of  said  partnership,  by  reason  of  the  death, 
withdrawal  or  other  act  of  any  partner  before  the  expiration  of  said  term, 
the  remaining  partners  may,  if  they  so  desire,  continue  the  business,  and 
they  shall  have  the  right  to  purchase  the  interest  of  such  partner  in  the 
business,   assets  and  good-will,  by  paying  the  value   of  such  interest  as 
determined  by  the  last  annual   inventory  and  accounting,   together   with 
six  per  cent,  interest  upon  such  value  since  such  inventory.     Upon  such 
payment    the    retiring   partner    or    his   representatives   shall    execute    and 
deliver  to  the  remaining  members  all  necessary  conveyances  of  such  interest. 
The  continuing  members  shall  assume  all  of  the  existing  firm  obligations, 
and  hold  the  sellers  harmless  from  all  liability  thereon.     The  continuing 
partners  may  use  the  former  firm  name  if  it  does  not  contain  the  name  of 
the  retiring  partner. 

15.  Upon  the  final  dissolution  of  said  firm  by  lapse  of  time  or  otherwise, 
the  said  business  shall  be  wound  up,  the  debts  paid,  and  the  surplus  divided 
between  the  partners  in  accordance  with  their  interest  therein. 

In  witness  whereof,  we  have  hereunto  set  our  hands,  the  day  and  year 
first  above  written. 

ADAM  SMITH. 
EDWIN  ARNOLD. 
EGBERT  BURNS. 


444 


PARTNERSHIP  FORMS 

NOTICE  OF  DISSOLUTION. 

(To  be  published  and  also  delivered  to  all  previous  creditors.) 

Notice  is  hereby  given  that  the  copartnership  heretofore  existing  between 
Adam  Smith,  Edwin  Arnold  and  Robert  Burns,  under  the  firm  name  of 
Adam  Smith  &  Company,  and  doing  business  at  Chicago,  Illinois,  has  been 
this  day  dissolved  by  mutual  consent.  [If  desired,  add:  Eobert  Burns  has 
retired  from  said  firm  and  business,  but  the  said  Adam  Smith  and  Edwin 
Arnold  will  continue  the  business  at  the  same  place  and  under  the  same 
firm  name.] 
Dated,  Chicago,  Illinois,  May  1,  1921. 

ADAM  SMITH. 

EDWIN  ARNOLD. 

EGBERT  BURNS. 


445 


TABLE  OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


A. 


Aas  v.  Benham,  170,  172. 

Abb    v.    Northern    Pacific    Ry.    Co., 

312. 
Abbott  v.  Omaha  Smelting  Co.,  23. 

v.  Johnson,  281,  384. 

v.  Anderson,  6. 

Acheson  v.  Miller,  188. 
Ackley  v.  Staehlin,  331. 
Adam  v.  Newbigging,  59,  373. 
Adams,  In  re,  458. 

v.  Achman,  271. 

v.  Albert,  460. 

v.  Beall,  49. 

v.  Brown,    298. 

v.  Church,  6,  7. 

v.  Hackett,  402. 

—  v.  Hardware  Co.,  289. 
-  v.  Kuehn,  319. 

—  v.  Leeds,  262. 

v.  Long,  257. 

v.  Lumber   Co.,   458. 

v.  Shewalter,    374. 

Adams  Express  Co.  v.  State,  123. 

African  M.  E.  Church  v.  New  Or- 
leans, 28. 

Aigen  v.  Boston,  etc.,  E.  B.  Co.,  3, 
84. 

Aiken  v.  Steiner,  316. 

Alabama  Fertilizer  Co.  v.  Reynolds, 
259. 

Albright  v.  McTighe,  338. 

Aldrich  v.  Chemical  Nat.  Bank,  455. 

Aldridgc,  In  re,  178. 


Alexander  v.  Alexander,  262,  293. 

v.  Gorman,  455. 

v.  Lewis,  408. 

—  v.  McPeck,  322. 
Alkire  v.  Kahle,  160 
Allen,  In  re,  477. 

v.  Anderson,  194. 

v.  Center  Valley  Co.,  446. 

v.  Chadsey,  271. 

v.  Cheever,  261. 

v.  Danielson,  455. 

v.  Davids,  6. 

v.  Farrington,  260. 

v.  Hawley,  231. 

v.  Logan,  364. 

v.  Maddox,  341. 

v.  Wells,  463. 

Alley  v.  Bowen-Merrill  Co.,  259. 
Alsop  v.  Central  Trust  Co.,  265. 

v.  Mather,  407. 

Altgelt  v.  Sullivan,  407. 

American     Linen     Thread     Co.     v. 

Wortendyke,  394. 

American  Loan  &  Trust  Co.  v.  Min- 
nesota, 19,  21. 

Ames  v.  Ames,  159. 

v.  Downing,  485. 

Anderson  v.  Clayton,  279. 

v.  Norton,  444. 

v.  Powell,  45. 

v.  Stayton  Bank,  309,  458. 

Andrews  v.   Brewing  Assoc.,  46. 

-  v.  Brown,  165,  402. 

—  v.  Planters  Bank,  277. 

v.  Stinson,  403,  407. 


447 


TABLE  OP  CASES 


[BEFEBENCES  ABE  TO  SECTIONS] 


Anfenson  v.  Banks,  102,  103. 
Angler  v.  Webber,  131. 
Anthony  v.  Jeffress,  270. 
Armstrong  v.  Am.  Exch.  Nat.  Bk., 
46. 

v.  Carr,  443. 

v.  Kleinhaus,  128. 

Armstrong  Co.  v.  Clarion  Co.,  188. 
Arnold  v.  Angell,  96. 

v.  Brown,  388. 

v.  Hagerman,  186,  444. 

v.  Hart,  394. 

v.  Nichols,  319. 

Arthur  v.  Weston,  153. 
Artman  v.  Ferguson,  52. 
Ash  v.  Guie,  3,  10. 
Ashurst  v.  Mason,  188. 
Askew  v.  Silman,  391,  392. 

v.  Springer,  179. 

Atherton  v.  Whitcomb,  182. 
Atkins,  Ex  parte,  451. 
v.  Hunt,  3,  30,  31. 

Atlas  Nat.  Bank  v.  Sarcey,  277. 
Aubin  v.  Holt,  225. 
Aultman  v.  Fuller,   148. 

v.  Wilson,  316. 

Austin  v.  Appling,  393,  397,  398. 

v.  Holland,  391,  398. 

v.  Munro,  407. 

v.  Neil,  96. 

v.  Thomson,  3. 

Avery  v.  Myers,  407. 

v.  Rowell,  277. 

Aylett  T.  Walker,  196,  220. 
Ayres  v.  Gallup,  319. 

B. 

Babcock  v.  Stewart,  318. 
Backus  v.  Taylor,  392. 
Badger  v.  Daenieke,  327. 
Baget  v.  Miller,  402. 
Bagley  v.  Smith,  137,  209. 
Bailey  v.  Bussing,  188. 
•  T.  Hemenway,  61. 


Baird  v.  Baird,  148. 
Baker  v.  Cooper,  232. 

v.  Mayo,  181,  182. 

v.  Nappier,  298. 

v.  Safe  Deposit  Co.,  472,  473. 

v.  Stackpoole,  425. 

Baldwin  v.  Leonard,  270. 
Bancroft  v.  Haworth,   297. 
Bank  v.  Delafield,  201. 

— —  v.  Mason,  242. 

Bank  Commissioners  v.  Trust  Co., 

455. 

Bank  of  Buffalo  v.  Thompson,  6,  7. 
Bank  of  Montreal  v.  Page,  347,  350. 

425,  426. 
Bank  of  New  Orleans  v.  Matthews, 

369,  388. 
Bank  of  Rochester  v.  Monteath,  122, 

296. 

Bank  of  Port  Gibson  v.  Baugh,  402. 
Bank    of    Monongahela    v.    Weston, 

277,  393. 
Banner  Tobacco  Co.  v.  Jenison,  246, 

247. 

Bannister  v.  Miller,  289,  443. 
Barclay  v.  Barrie,  171,  365,   376. 
Barcroft  v.  Haworth,  122. 
Bardwell  v.   Perry,  431,  454. 
Barkley  v.  Topp,  364. 
Barlow  v.  Parsons,  52. 
Barnard,  In  re,  458. 
Barnard  v.  Plank-road  Co.,  246. 
Barnes  v.  Boyers,  428. 

v.  Clark,  170. 

v.  Colorado,  etc.,  R.  Co.,  271. 

v.  Jones,  231. 

Barnett  v.  Lambert,  29. 
Barrett  v.  McKenzie,  417. 
Barry  v.  Briggs,  402. 
Barry  v.  Jones,  178. 
Bartlett  v.  Boyles,  182. 

v.  Meyer-Schmidt  Grocery  Co., 

444. 

v.  Powell,  251. 

Barton  v.  Lovejoy,  403. 
448 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Bass  v.  Emery,  405. 

Bass  Dry  Goods  Co.  v.  Granite  City 

Mfg.  Co.,  404. 
Bassett  v.  Miller,  402. 

v.  Pereival,  131. 

v.  Shepardson,  366. 

Batard  v.  Hawes,  3,  29. 
Batchelder  &  Co.  v.  Batchelder,  132. 
Bates  v.  Babcock,  42,  43,  61,  83. 

v.  Collender,  446. 

'  v.  Coronado  Beach  Co.,  53. 

—  v.  Lane,   193,  211. 
Battle  v.  Davis,  232. 
Bauer    Grocer    Co.   v.    McKee    Shoe 

Co.,  402. 
Baxter  v.  Hart,  81. 

v.  Eodman,  15. 

v.  Eollins,  235,  240,  278,  295, 

296. 

Bays  v.  Conner,  257. 

Beacannon  v.  Liebe,  196,  219,  220. 

Beaman  v.  Whitney,  35,  153. 

Beard  v.  Rowland,  98. 

Beardsley  v.  Hall,  425. 

Beauchamp,  Ex  parte,  7. 

Beauregard  v.  Case,  341. 

Beekham  v.  Drake,  292. 

Beckwith  v.  Mace,  291. 

Beebe  v.  Olentine,  61. 

Beecher  v.  Bush,  59,  73,  79,  83,  92, 

93. 

Beede  v.  Fraser,  193,  196,  203,  219. 
Behrens  v.  McKenzie,  51. 
Belcher  v.  Whittemore,  172. 
Bell  v.  Hall,  428. 

v.  Hudson,  227. 

v.  Newman,  454. 

Belser   v.    Tuscumbia   Banking   Co., 

52. 

Belton  v.  Fisher,  402. 
Benard  v.  Packard,  479. 
Benedetto  v.  Di  Bacco,  175. 
Benjamen  v.  McConnell,  311. 
Benjamin  v.  Covert,  393,  397,  398. 
Bennett  v.  Bennett,  165. 


Bennett  v.  Lathrop,  3. 

v.  Stickney,  254,  276. 

Benninger  v.  Hess,  250. 
Bentley  v.  Harris,  230. 

v.  White,  257. 

Beresford  v.  Browning,  411. 
Bergeron  v.  Hobbs,  23. 

v.  Eichardott,  168. 

Berkshire    Woolen    Co.    v.    Juillard, 

122,  295. 
Bernheimer  v.  Becker,  276,  302. 

v.  Eindskopf,  444. 

Berridge  v.  Dawson,  322. 

Berry  v.  Gillis,  311. 

Bertenshaw,  In  re,  6,  414. 

Bestor  v.  Barker,  59. 

Bienenstok  v.  Ammidown,  271,  304. 

Bigelow  v.  Gregory,  23. 

v.  Reynolds,  330. 

Big  Four  Implement  Co.  v.  Keyser, 

402,  403. 

Bigwold  v.  Waterhouse,  270. 
Bininger  v.  Clark,  124. 
Binns  v.  Waddill,  331. 
Birchett  v.  Boiling,  222. 
Bird  v.  Bird,  456. 

v.  Wilcox,   42,   61. 

Bird  Co.  v.  Hurley,  52. 
Birmingham  Loan  Co.  v.  First  Nat. 

Bank,  121. 
Bisel  v.  Hobbs,  287. 
Bishop  v.  Bishop,  190. 
Bishop  v.  Hall,  110,  325. 
Bitzer  v.  Shung,  300. 
Bivingsville  Mfg.  Co.  v.  Bobo,  262. 
Bixler  v.  Kresge,  49,  460. 
Blair  v.  Black,  454. 

v.  Eussell,  301. 

v.  Wood,  411. 

Blake  v.  Atlantic  Bank,  319. 

v.  Sweeting,  357. 

Blakely  v.  Smock,  403,  411. 
Blaker  v.  Sands,  274,  357,  359. 
Blakeslee  v.  Blakeslee,  161. 
Blanchard  v.  Floyd,  155. 


Mech.  Part.— 29 


449 


TABLE  OP  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Blancharfl  v.  Pascal,  316. 
Blinn  v.  Schwartz,  51. 
Blissett  v.  Daniel,  115,  281. 
Block  v.  Price,  391. 
Blodgett  v.  American  Nat.  Bk.,  272, 
403,  408. 

v.  Sleeper,  331. 

Bloom  v.  Helm,  277. 

v.  Insurance  Agency,  127. 

v.  Lofgren,  170,  229. 

Bloxham  v.  Pell,  96. 

Blue  v.  Leathers,  15,  83. 
Blumenfield  v.  Seward,  148. 
Blumenthal  v.  Whitaker,  478. 
Blythe,  Ex  parte,  451,  468. 
Blythe  v.  Cordingly,  309. 
Boardman  v.  Adams,  116,  246,  248. 
Bodey  v.  .Cooper,  290. 
Bogert  v.  Turner,  232. 
Bohrer  v.  Drake,  173,  347. 
Bolen  v.  Ligett,  121. 
Bolton  v.  Puller,  196. 
Bond  v.  Gibson,  259. 
Bonesteel  v.  Todd,  294. 
Bonnafee  v.  Fenner,  217. 
Bonneau  v.  Strauss,  300. 
Bonwit  v.  Heyman,  196,  451. 
Boosalis  v.  Stevenson,  65. 
Booske  v.  Ice  Co.,  24. 
Booth  v.  Jarre%  128. 
Bopp  v.  Fox,  31,  159. 
Boreing  v.  Wilson,  182. 
Bosanquet  v.  Wray,  196,  219. 
Boston  Smelting   Co.   v.  Smith,  64, 

77,  98. 

Boswell  v.  Green,  274. 
Boughner  v.  Black,  215. 
Bowine,  In  re,  403. 
Bourne  v.  Freeth,  30. 
Boyee  v.  De  Jong,  328. 
Bowen  v.  Clark,  253. 

v.  Eutherford,  65. 

Bowker  v.  Bradford,  52. 

Boyd  v.   Amer.  Carbon  Black   Co., 
53. 


Boyd  v.  Thompson,  262,  264. 
Boykin  v.  Persons,  341. 
Brace  v.  Calder,  420. 
Bracken  v.  Dillon,  318. 

v.  Kennedy,  227. 

Bradford   Comm.    Bk.   Co.   v.   Cure, 

403. 

Bradley,  In  re,  458. 
Bradley  v.  Chamberlin,  117. 

v.  Conner,  92. 

v.  Ely,  59,  64,  72,  83. 

Brasfield  v.  French,  407. 
Brainerd  v.  Bertram,  329. 
Bramah  v.  Roberts,  257. 
Branch  v.  Wiseman,  148. 
Brandenstein  v.  Hoke,  22. 

Brass  &  Iron  Works  Co.  v.  Payne, 

126. 

Breen  v.  Richardson,  403. 
Brennan  v.  Pardridge,  121. 
Brenner  v.  Carter,  182. 
Brewer  v.  Browne,  163. 
Briar    Hill    C.    &    I.    Co.    v.    Atlas 

Works,  478. 
Brickett   v.    Downs,    185,   239,   260, 

267,  272,  274,  331. 
Briere  v.  Taylor,  3. 
Briggs,  Ex  parte,  79. 
Bright  v.  Carter,  193. 
Brill  v.  Hoile,  428. 
Broadway  Nat.  Bk.  v.  Wood,  460. 
Bromley  v.  Elliot,  87,  235,  240,  287. 
Brooke  v.  Washington,  287. 
Brooks  v.  Brooks,  403. 

v.  Hamilton,  246. 

v.  Martin,  46,  170,  278. 

v.  Mclntyre,  310,  314. 

Brosnau  v    McKee,  61. 
Broughton    v.    Manchester    Water- 
works, 257. 

Brojvn  v.  Benzinger,  131. 

v.  Birdsall,  294. 

v.  Chancellor,  52,  366. 

v.  Crandall,  65. 

v.  Foster,  397. 


450 


TABLE  OF  CASES 


[EEFEEENCES  ABB  TO  SECTIONS! 


Brown  v.  Fresno  Eaisin  Co.,  289. 

v.  Hartford,  6. 

v.  Hartford  Ins.  Co.,  266. 

v.  Hutchinson,   149. 

v.  Leonard,  398. 

v.  Orr,  185. 

v.  Pettit,  277. 

v.  Stoerkel,  3. 

v.  Tapscott,  81,  210. 

v.  Webb,  27. 

Brownell  v.  Steere,  187. 
Browning  v.  Marvin,  326. 

Bruce  v.  Hastings,  14,  16,  83,  206. 

Brumwell  v.  Stebbins,  271. 

Brundage  v.  Melton,  250,  301. 

Bruns  v.  Heise,  227. 

Bryant  v.  Clifford,  341. 

Buchan  v.  Sumner,  163,  166,  452. 

v.  Mechanics',  etc.,  Inst.,  194, 

200. 

Buck  v.  Alley,  477,  481. 
Buck  v.  Moseley,  331. 

v.  Smith,   119,  222,  223. 

v.  Winn,  452. 

Buckhouse,  In  re,  219,  233,.  461. 
Bucki  v.  Cone,  301. 

Buckley  v.  Doig,  163. 

Buckmaster  v.  Gowen,  214. 

Buettner  v.   Steinbrecher,  256. 

Buffalo  Milling  Co.  v.  Lewisburg 
Dairy  Co.,  111. 

Buffum  v.  Buffum,  169. 

Building  &  L.  Ass'n  v.  Chamber- 
lain, 24. 

Bulger  v.  Rosa,  444,  448. 

Bull  v.  Coe,  193,  211. 

Bullard  v.  Kinney,  200. 

Bullen  v.  Sharp,  91. 

Bullock  v.  Hubbard,  54,  449,  461. 

Bumpus  v.  Turgeon,  331. 

Bunton  v.  Dunn,  322. 

Burchell  v.  Wilde,  125. 

Burdett  v.  Greer,  291. 

Burgan  v.  Lyell,  250,  251. 

Burgess  v.  Badger,  178. 


Burgwyn  v.  Jones,  61. 
Burley  v.  Harris,  201. 
Burnes  v.  Scott,  217. 
Burnet  v.  Hope,  400. 
Burnett  v.  Snyder,  58. 
Burney  v.  Grocery  Co.,  52. 
Burnham  v.  Kidwell,  51. 
Burns  v.  McCabe,  153. 

v.  Nottingham,  203. 

Burrows  v.  Leech,  196,  233. 
Burt  v.  Lathrop,  3,  10. 
Burton  v.  Wookey,  170. 
Burwell  v.  Mandeville,  407. 
Busby  v.  Books,  331. 
Bush  v.  Linthicum,  49. 
Bush  v.  McCarty,  394. 
Bushnell  v.  Ice  Co.,  23. 
Butchart  v.  Dresser,  403,  423. 
Butler  v.  American  Toy  Co.,  53. 

v.  Mullen,  388. 

V.  Prentiss,  170. 

v.  LTnion  Trust  Co.,  16,  43. 

Butler    Savings    Bank    v.    Osborne, 

12. 
Buzard  v.  Bank  of  Greenville,  79. 

v.  McAnulty,  30. 

Byam  v.  Biekford,  28,  153,  155. 
Byers  v.  Schulpe,  123. 
Byrne  v.  Eeid,  222,  224. 
Byrum  v.  Clark,  394. 


0. 


Cady  v.  Shepherd,  263. 

Cain  v.  Hubble,  452. 

Cain  Lumber  Co.  v.  Standard  Dry 

Kiln  Co.,  31. 
Caldwell  v.  Caldwell,  225. 

v.  Davis,  170. 

v.  Leiber,  178. 

California  Bank  v.  Kennedy,  53. 
Calkins  v.  Smith,  215,  330. 
Callahan  v.  Heinz,  278,  279. 
Callender  v.  Eobinson,  287. 
Calor  Oil  Co.  v.  Franzell,  27. 


451 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Calvert  v.  Miller,  403. 

Calvit's   Ex'rs    v.    Markham,    219, 

233. 

Gambia  v.  Santos,  15. 
Cambre  v.  Lasseigne,  194. 
Camerson  v.  Francisco,  178. 
Cameron  v.  Watson,  472. 
Cammock  v.  Johnson,  459. 
Camp  v.  Grant,  411,  454. 
Campbell  v.  Colo.  Coal  &  Iron  Co., 

461. 
Campbell  v.  Floyd,  428. 

<-  v.  Hastings,  102. 

-  v.  Herriek,  425. 

v.  Steele,  294. 

Canada  v.  Barksdale,  16,  43. 

Candee  v.  Clark,  294. 

Cannon  v.  Lindsey,    185,   272,   274, 

341. 
Canton  Bridge  Co.  v.  City  of  Eaton 

Eapids,  77. 

Capen  v.  Barrows,  214. 
Capper's  Case,  29. 
Carey  v.  Burruss,  52. 
Cargill  v.  Corby,  240. 
Garland  v.  Heckler,  121. 
Carley  v.  Jenkins,  251. 
Carlin  v.  Donegan,  173. 
Carpenter  v.  Greenop,  181,  194,  200, 

217. 

Carr  v.  Hertz,  242,  267. 
Carrie  v.   Cloverdale  Co.,  146,  253, 

274,  331. 

Carver  Machine  Co.  v.  Bannon,  186. 
Carr  v.  Lewis  Coal  Co.,  388. 
Carson  v.  Byers,  295. 
Carter  v.  Beckwith,  51. 

v.  Flexner,  163,  166. 

v.  Lipsey,  304. 

v.  MeClure,  3,  35,  361. 

v.  Mitchell,  297. 

v.  Producers'  Oil  Co.,  36. 

v.  Roland,  359,  363. 

v.  Whalley,  397. 

Case  v.  Beauregard,  432,  449. 


Cash  v.  Earnshaw,  357,  377. 
Cashin  v.  Pliter,  121. 
Caster  v.  Graham,  121. 

v.  Reynolds,  402. 

Catholic   Church   v.   Tobbein,  22. 
Catskill  Bank  v.  Gray,  53. 
Causten  v.  Barnette,  16,  43. 
Cavasso  v.  Downey,  372. 
Cavender  v.  Balteel,  168. 
Cayton  v.  Hardy,  274. 
Cedarberg  v.  Guernsey,  15,  83. 
Central  Nat.  Bank  v.  Frye,  394. 

v.  Sheldon,  23. 

Central  Savings  Bank  v.  Meade,  402. 
Central  Trust  Co.  v.  Creel,  16. 

v.  Respass,  42,  44,  46. 

Chalmers  v.  Chalmers,  173. 
Chambers  v.  Sloan,  7. 
Chamberlain  v.  Dow,  393. 

v.  Stewart,  342. 

Champion  v.  Bostwick,  83. 
Chancey  v.  May,  329. 
Chandler  v.  Jessup,  157. 

v.  Sherman,  175. 

Channon  v.  Stewart,  230. 
Chapman  v.  Evans,  219. 

v.  Hughes,  72. 

Charles  v.  Eshleman,  254. 
Charlton  v.  Sloan,  173,  187. 
Chase  v.  Angell,  165. 
v.  Bean,  331. 

v.  Scott,  415. 

Cherry  v.  Strong,  15. 
Chesher  v.  Clamp,  445. 

Chester  v.  Dickerson,  42,  61,  301. 

Chicago  v.  Sheldon,  114. 

Chicago  Hansom  Cab  Co.  v.  Yerkes, 

282. 
Chicago    Lumber    Co.   v.    Ashworth, 

150. 

Chick  v.  Robinson,  477. 
Childers  v.  Neely,  37,  229,  241,  257. 
Childs  v.  Hyde,  402. 
Chippendale,  Ex  parte,  182. 


452 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Chittenden      v.      German-American 
Bank,  268. 

v.  Witbeck,  128. 

Church  v.  First  Nat.  Bank,  331. 
Churchill  v.  Proctor,  168. 
Citizens'  Commercial  Bank  v.  Platt, 

279. 
Citizens'  Bank  v.  Mitchell,  44. 

v.  Williams,  442. 

Citizens  Mut.  Ins.  Co.  v.  Ligon,  407. 
Citizens '  Nat.  Bank  v.  Johnson,  267. 

v.  Weston,  393. 

City  Nat.  Bank  v.  Stone,  407. 
Claflin  v.  Behr,  453. 

v.  Bennett,  474. 

v.  Cross,  16. 

Clafflin  v.  Evans,  253,  279. 
Claggett  v.  Kilbourne,  417. 
Clay  v.  Field,  402. 
Clapp  v.  Lacey,  483. 

v.  Eogers,   391. 

Clark  v.  American  Cannell  Coal  Co., 
22. 

v.  Fleischman,  402. 

v.  Fletcher,  397. 

v.  Gridley,  227. 

v.  Hyman,  283. 

v.  Johnson,  259. 

v.  Jones,  121. 

v.  Mallory,  311. 

v.  Eives,  274. 

v.  Sidway,  14,  16,  43,  206. 

v.  Taylor,  250. 

v.  Truitt,  222,  223. 

v.  Warden,  182. 

Clarke  v.  Clarke,  175. 

v.  Hogeman,  274. 

v.  Mills,  190,  205. 

v.  Eailroad  Co.,  282. 

v.  Taylor,  341. 

v.  Wallace,  277. 

Clayton  v.  Davett,  187. 

v.  May.  314. 

Clement  v.  Brit,  327. 

v.  Clement,  425. 


Clements  v.  Jessup,  444. 

Cleveland   v.   Woodward,   292,   333, 

335. 
Cleveland  Paper  Co.  v.  Courier  Co., 

53. 

Clift  v.  Barrow,  81. 
Clifton  v.  Clark,  403. 

v.  Howard,  77,  94. 

Clinchfield  Fuel  Co.  v.  Lundy,  428. 
Clogston  v.  Gholson,  407. 
Clough,  In  re,  403. 

Cobb  v.  Benedict,  322,  427. 

v.  Cole,  474. 

v.  Martin,  203. 

Cocke  v.  Branch  Bank,  257. 
Codville  Co.  v.  Smart,  49,  460. 
Coffee  v.  Brian,  212. 

Coffin  v.  Day,  444. 
Coggschell  v.  Munger,  193. 
Coggswell  v.  Davis,  394. 
Coggswell,    etc.,    Co.    v.    Coggswell, 

372. 

Coldren  v.  Clark,  182. 
Cole  v.  Mette,  123,  153. 

v.  Moxley,  347. 

v.  Reynolds,  196,  220. 

Coleman  v.  Darling,  253,  283. 

v.  Eyre,  61a. 

Colgrove  v.  Tallman,  428. 
Collamer  v.  Foster,  210. 
Coller  v.  Porter,  258. 
Collier  v.  McCall,  301. 

v.  Postum  Cereal  Co.,  330. 

Collins'  Appeal,  146. 

Collins  v.  Campbell,  341. 

v.  Decker,  159,  161. 

Collner  v.  Greig,  158. 

Collums  v.  Bead,  163. 

Collyer  v.  Moulton,  429. 

Columbian    Land    &    Cattle    Co.    v. 

Daly,  481. 
Columbia   Nat.   Bank   v.   Eiee,   239, 

250. 

Colwell  v.  Weybossit  Bank,  295. 
Commercial  Bank  v.  Pfeiffer,  24. 


453 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Conary  v.  Sawyer,  49. 
Condon  v.  Callahan,  178,  403. 
Congdon  v.  Olds,  37,  241,  257. 
Conrad  v.  Buck,  425,  426. 
Conroy  v.  Campbell,  473. 

v.  Woods,  449. 

Consaul  v.  Cummings,  178. 
Consolidated  Bank  v.  State,  81. 
Const  v.  Harris,  116,  281. 
Continental    Nat.    Bk.    v.    Strauss, 

49,  479. 

Conway  v.  Zender,  217. 
Cook,  Ex  parte,  451. 

v.  Canny,  193,  210. 

v.  Carpenter,  31. 

v.  Gray,  264. 

v.  Slate  Co.,  65. 

Cooley  v.  Sears,  341. 
Coope  v.  Eyre,  13. 
Coover's  Appeal,  416. 
Corbett,  Ex  parte,  7. 
Corey  v.  Perry,  414. 
Cornells  v.  Stanhope,  273,  331. 
Cornhauser  v.  Eoberts,  102. 
Cossack  v.  Burgwyn,  92. 
Costa  v.  Costa,  129,  402. 

Cottrell  v.  Babock  Printing  Press 
Co.,  131. 

Cothran  v.  Marmaduke,  92. 

Cottentin  v.  Meyer,  24. 

Cottle  v.  Leitch,  377. 

Cotton  Plant  Oil  Mill  Co.  v.  Buck- 
eye Cotton  Oil  Co.,  256,  282. 

Cotzhausen  v.  Judd,  260,  331. 

Couchman  v.  Maupin,  450. 

Couilliard  v.  Eaton,  215. 

Courson  v.  Parker,  328. 

Cowan  v.  Creditors,  316. 

v.  Cunningham,  264. 

v.  Fairbrother,  127. 

v.  Gill,  456. 

Coward  v.  Clanton,  16. 

Cowen  v.  Hardware  Co.,  185,  341. 
Cox  v.  Hickman,  88. 

v.  Maddux,  294. 


Cox  v.  Willoughby,  225. 

Coxe  v.  State,  22. 

Craft  v.  McConoughy,  44,  46. 

Craig  v.  Aulschizer,  331. 

Crater  v.  Bininger,  210. 

Craswell  v.  Cattle  Co.,  291. 

Crawford  v.  Roberts,  311. 

Creed  v.  Hartman,  338. 

Creel  v.  Bell,  327. 

Crooks  v.  Crooker,  291,  452. 

Croone  v.  Bivens,  436. 

Crouch  v.  First  Nat.  Bk.,  478. 

Crescent  Ins.  Co.  v.  Bear,  46. 

Crites  v.  Wilkinson,  274. 

Crittenden  v.  Cobb,  205. 

Cross  v.  National  Bank,  319. 

Crossley  v.  Taylor,  190. 

Crosby  v.  Timolat,  196,  219,  233. 

Crockett  v.  Burleson,  216. 

Crosthwaite  v.  Ross,  257. 

Cruttwell  v.  Lye,  127. 

Culley  v.  Edwards,  77,  79,  98. 

Currier  v.  Rowe,  211. 

Curtis  v.  Belknap,  327. 

v.  Hollingshead,    6,   314. 

v.  Woodward,  455. 

Gushing  v.  Smith,  298. 
Cutler  v.  Winsor,  83. 
Cutling  v.  Daigneau,  194,  200. 
Czatt  v.  Case,  121. 

D. 

Dana  v.  Stearns,  50. 
Daniel  v.  Cross,  411. 

v.  Daniel,  331. 

v.  Gillespie,  474. 

v.  Owens,   148. 

Darby  v.  Darby,  163. 

v.  Gilligan,  447. 

Darling  v.  March,  423. 
Darrow  v.  Calkins,  163,   169. 
Dauchy,  In  re,  455. 

454 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Davenport-Mills    Co.    v.    Chambers, 

262. 

Davis,  Estate  of,  426. 
Davis  v.  Amer,  225. 

v.  Berger,  252. 

v.  Christian,  164,  407. 

-  v.  Cook,  259. 

-  v.  Davis,  4,   13,   59,  136,  140, 
228. 


v.  Dodson,  246,  302. 

v.  Gelhaus,  44,  188. 

v.  Green,  165. 

v.  Howell,  453. 

v.  Megroz,  364,  423. 

v.  Merrill,  196,  200. 

v.  Kichardson,  279,  283. 

v.  Smith,  163,   169. 

-  v.  Sowell,  403,  404. 

v.  Stevens,  21. 

v.  Turner,  295. 

Davison  v.  Holden,  3,  10. 
Davies  v.  Atkinson,  185. 
Daw  v.  Herring,   117. 
Dawson  v.  Elrod,  242,  283. 
Day  v.  Stevens,  15,  83. 
Dayton  v.  Bartlett,  403. 
Deakin  v.  Underwood,  251. 
Dean  v.  Collins,  428. 

v.  Dean,  133. 

v.  MacDowell,  172. 

Dearborn  v.  Keith,  148. 
Deardorf  v.  Thacher,  257. 
Deekard  v.  Case,  253. 
Decker  v.  Howell,  37. 
Deering  v.  Flanders,  397. 
Deeter  v.  Sellers,  267. 
Deford  v.  Reynolds,  397. 
De  Leon  v.  Trevino,  46. 
Dell,   In  re,  456. 
Delmonico  v.  Guillaume,  169. 
Denholm  v.  McKay,  402. 
Denning,  In  re,  446. 
Dennis  v.  Gordon,  172. 

• v.  Kass,  316. 

Denny  v.  Cabot,  79. 


Denny  v.  Metcalf,  219. 
Denver  v.  Eoane,  227. 
Deska  v.  Smith,  183. 
De  Tastel  v.  Shaw,  219. 
Deutschman  v.  Dwyer,  170. 
Devaynes  v.  Noble,  403,  411. 
Deveney  v.  Mahoney,  160. 
Dewey  v.  Chapin,  402. 
DeWit  v.  Lander,  327. 
Dexter  v.  Arnold,  182. 
Diamond  v.  Henderson,  175. 
Dickinson  v.  Bold,  117. 

v.  Dickinson,  394. 

v.  Valpy,  30. 

Didlake  v.  Grocery  Co.,  129. 
Dillon,  In  re,  446. 

Dimon  v.  Hazard,  446. 
Dinham  v.  Bradford,  182,  225. 
Divine  v.  Mitchum,  435,  452. 
Dixon  Livery  Co.  v.  Kane,  341. 
Dob  v.  Halsey,  87,  331. 
Dockery  v.  Faulkner,  297. 
Dodge  v.  Cutrer,  319. 

v.  Ship  Co.,  326. 

Doggett  v.  Dill,  411. 

Doll  v.  Hennessy  Merc.  Co.,  331. 
Donaghue  v.  Gaffy,  330. 
Donald  v.  Hewitt,  267. 
Doner  v.  Stauffer,  146,  416. 
Donnell  v.  Harshe,  15,  83. 

v.  Jones,  330. 

v.  Portland,  etc.,  R.  Co.,  341. 

Dorwart  v.  Ball,  190,  205. 

Doty  v.  Patterson,  23. 
Douthit  v.  Douthit,  203. 
Dow  v.  Moore,  256. 

v.  Simpson,  405. 

v.  State  Bank,  30. 

Dowling    v.    Exchange    Bank,    241, 

257. 

Downs  v.  Jackson,  187. 
Dowse  v.  Gorton,  408. 
Drake  v.  Thyng,  274. 
Drennen  v.  Gilmore,  341. 
Dressel  v.  Lonsdale,  52. 


455 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Dresser  v.  Wood,  271. 

Dreyfus  v.  Union  Nat.  Bank,  122, 

295. 

Drilling  v.  Armstrong,  79. 
Drucker  v.  Wellhouse,  6,  7. 
Drumright  v.  Philpot,  250. 
Dubois'  Appeal,  264. 
Dubos  v.  Jones,  103. 
DuBree  v.  Albert,  162. 
Dubrenil  v.  Gaither,  342. 
Duff  v.  Maquire,  199. 
Duguid,  In  re,  49. 
Duke  v.  Taylor,  23. 
Dukes  v.  Kellogg,  215. 
Dunlap  v.  Byers,  163. 

v.  Green,  153. 

Duncan  v.  Duncan,  164. 
Dunham  v.  Loveroek,  11,  12,  66. 
• v.  Presby,  45. 

Dunnica  v.  Clinkscales,  450. 

Dunnigan,  In  re,  49. 

Dunning 's  Appeal,  483. 

Dunphy  v.  Kyan,  61. 

Dunton  v.  Brown,  49. 

Duquesne  Distributing  Co.  v.  Green- 

baum,  302. 
Durant  v.  Abendroth,  477,  478. 

v.  Pierson,  402,  403. 

Durgin  v.  Colburn,  484. 
Duryea  v.  Burt,  168. 

v.  Whitcomb,  59,  72. 

Dutcher  v.  Buck,  15,  83,  92. 
Dutton  v.  Woodman,  65. 
Dwight  v.  Hamilton,  131. 
Dwinel  v.  Stone,  15. 

Dwyer  Pine  Land  Co.  v.  Whiteman, 

153. 
Dyer  v.  Clark,  165,  169,  402. 

v.  Shore,  125,  129,  402. 

v.  Sutherland,  261. 

E. 

Eady  v.  Newton,  331. 

v.  Newton  Coal  &  Lumber  Co., 

116,  248,  260. 


Eagle  v.  Bucher,  384. 

Eagle  Mfg.  Co.  v.  Jennings,  429. 

Early  v.  Burt,  429. 

Earon  v.  Mackey,  426. 

Eastern   Township   Bank   v.    Beebe, 

294. 

Eastman  v.  Clark,  83. 
Easton  v.  Courtright,  405. 

v.  Strother,  170. 

Eaton  v.  Walker,  22,  24. 
Edgerly  v.  Gardner,  3. 

Edison  Illuminating  Co.  v.  De  Mott, 

451,  468. 

Edward  v.  McFall,  397. 
Edwards  v.  Dillon,  264. 

v.  Eemington,  193,  212,  322. 

v.  Warren  Linoline  Works,  36. 

Effinger,  In  re,  456. 

Eichbaum  v.  Irons,  10. 

Eighth  Nat.  Bank  v.  Fitch,  148. 

Eilers  Music  House  v.  Eeine,  189. 

Einstein  v.  Schnebly,  177. 

Elder  v.  Hood,  218. 

Elgie  v.  Webster,  211. 

Elgin  Jewelry  Co.  v.  Wilson,  121. 

Elkinton  v.  Booth,  397. 

Elliot  v.  Stevens,  460. 

Ellis  v.  Allen,  242,  267,  274. 

v.  Harrison,  319. 

Ellison  v.  Lucas,  186,  443. 

v.  Sexton,  394. 

Elmira  Boiling  Mill  v.  Harris,  287, 

397. 

Emerick  v.  Moir,  472. 
Emerson  v.  Durand,  179. 

v.  Senter,  403. 

Emery  v.  Candle  Co.,  46. 
v.  Pease,  204. 

v.  Wilson,  217. 

Empire  Mills  v.  Alston  Grocery,  21. 
England  v.   Curling,   116,   119,   222, 

224. 

Englar  v.  Offutt,  271,  304. 
Enix  v.  Hayes,  325. 


456 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Enterprise  Oil  &  Gas  Co.  v.  Transit 

Co.,  283. 

Espy  v.  Comer,  164. 
Estabrook  v.  Messersmith,  331. 

v.  Woods,  79. 

Essel  v.  Hayward,  377. 
Essex  v.  Essex,  410. 
Eustis  v.  Bolles,  362,  388. 
Evans  v.  Bryan,  316. 

Evens  &  Howard  Fire  Brick  Co.  v. 

Hadfield,  106. 
Everit  v.  Strong,  264. 
Everitt  v.  Chapman,  64,  247. 
Everly  v.  Durborrow,  472. 
Ewart  v.  Mercantile  Co.,  449. 
Ewers  v.  Montgomery,  42. 
Exchange  Bank  v.   Gardner,  173. 

v.  Tracy,  361,  407. 

F. 

Fairchild  v.  Fairchild,  61,  163. 

Fairthorne  v.  Weston,  227,  378. 

Fancher  v.  Furnace  Co.,  252. 

Faris  v.  Cook,  233. 

Farley  v.  Lovell,  331. 

Farley  v.  Moag,  417. 

Fanners  Bank  v.  Bayless,  291,  297. 

v.  Eidge  Ave.  Bank,  455. 

Farmers'  L.  &  T.  Co.  v.  New  York, 

etc.,  R.  Co.,  282. 
Farmers  Union  Co.  v.  Seitz,  316. 
Farnum,  In  re,  458. 
Farnum  v.  Ewell,  330. 

v.  Patch,  3,  35. 

Farnsworth  v.  Boardman,  481. 
Farrand  v.  Gleason,  14,  16. 
Farris  v.  Morrison,  273,  274. 
Farwell  v.  Huston,  262. 

v.  St.    Paul    Tmst    Co.,    185, 

260. 

v.  Wilcox,   209. 

Faulkner  v.  Hyman,  6. 
Fay  v.  Burditt,  51. 

Fayette   Nat.  Bk.  v.   Kenney,   454, 
458. 


Fechteler  v.  Palm  Bros.,  72,  77. 
Feigley  v.  Whitaker,  250,  425. 
Fenn  v.  Bolles,  126. 
Fereira  v.  Sayres,  400. 
Ferevira  v.  Silvey,  270. 
Ferguson  v.  Baker,  213. 
Fern  v.  Gushing,  415. 
Fernald  v.  Clark,  428. 
Ferrara  v.  Russo,  410. 

v.  Buhlmeyer,  357. 

Ferris  v.  Van  Ingen,  407. 
Feust  v.  Brown,  205,  256. 
Fidelity    Banking    Co.    v.    Kangara 

Co.,  242. 

Fifth  Ave.  Bank  v.  Colgate,  484. 
Fillans  v.  Greenfield,  283. 
Filley  v.  Phelps,  148,  411. 
Fillyan  v.  Laverty,  411. 
Finnegan  v.  Noerenberg,  23. 
Fireman's  Ins.  Co.  v.  Floss,  325. 
First  International  Bank  v.  Brow*, 

393. 
First  Nat.  Bk.,  Ex  parte,  458. 

v.  Brenneisen,  443. 

v.  Brubaker,  443. 

v.  Carpenter,  277. 

v.  Cheney,  428. 

v.  Cody,  31,  63,  402. 

v.  Conway,  65,  250,  372. 

v.  Creveling,  478. 

v.  Farson,  241,  256,  277. 

v.  Freeman,  274. 

v.  Frost,  316. 

v.  Green,  429. 

v.  Greig,  271. 

v.  Grignon,  279. 

v.  Larson,  242. 

v.  Rowley,  277. 

v.  State  Savings  Bank,  429. 

v.  Webster,  256. 

v.  Wood,  451. 

Fish  v.  Gates,  326,  423. 

v.  Thompson,  77,  415. 

Fish  Bros.  Wagon  Co.  v.  Fish,  126. 
Fisher  v.  Syfera,  443. 


457 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Pitch  v.  Harrington,  58. 
Fitzgerald  v.  Grimmell,  6. 
Titzpatrick  v.  Flannagan,  403. 
Fitzsimmons  v.  Lindsay,  410. 
Flagge  v.  Stowe,  23. 
Fleming  v.  Fleming,  11,  410. 
Flemyng  v.  Hector,  10. 
Fletcher  v.  Ingram,  338. 

v.  Pullen,   102,   103,  106,  107. 

—  v.  Reed,  351. 

v.  Vandusen,  226. 

Flower  v.  Barnekoff,  42,  43,  61,  77, 

83. 

Floyd  v.  Duffy,  61. 
Fogg  v.  Johnston,  373. 

v.  Lawry,  148. 

v.  Virgin,  333. 

Folds  v.  Allardt,  49. 

Folsom  v.   Marlette,   175,   181,  229, 

469. 

Foot  v.  Goldman,  49. 
Forbes  v.  Scannell,  279. 

v.  Webster,  187. 

v.  Whittemore,  23. 

Fordyce  v.  Shriver,  54,  278. 
Forney  v.  Adams,  331. 
Forster  v.  Lawsen,  330. 
Forsyth  v.  Butler,  182. 

v.  Woods,  450. 

Fosdick  v.  Van  Horn,  298. 
Foster's  Appeal,  166. 
Foster  v.  Sargent,  157. 

Fourth  St.  Nat.  Bank  v.  Whitaker, 

484. 

Fowlkes  v.  Bowers,  458. 
Fox  v.  Clifton,  30. 

v.  Curtis,  253. 

v.  Firth,  217. 

v.  Norton,  263. 

Foyer  v.  Harken,  45. 
Francis  v.  McNeal,  6,  7. 
Frank  v.  Anderson,  200. 
Franklin  v.  Hoadley,  65. 
Fraser,  In  re,  106,  398. 
Fraser  v.  Kershaw,  414. 


Frazer   v.    Frazer    Lubricating   Co., 
126. 

v.  Ho/we,  318. 

v.  Linton,  145. 

Frear  v.  Lewis,  129. 
Free  v.  Beatley,  165. 
Freeman  v.  Campbell,  295. 

v.  Freeman,  230. 

v.  Huttig  Co.,  318. 

v.  Stewart,  411. 

Freeport  Stone  Co.  v.  Carey,  454. 
French  v.  Chase,  459. 

v.  Donohue,  53. 

v.  Parker,  127. 

v.  Styring,  11,  14,  83. 

v.  Vanatta,  402. 

Freund  v.  Murray,  351. 
Frey  v.  Eisenhardt,  157. 

v.  Duryee,  257. 

Frink  v.  Branch,  161. 
Frith  v.  Thompson,  215. 
Frost  v.  Erath  Cattle  Co.,  251. 
Frost  v.   Thompson,  26,  40. 

v.  Wolf,  163. 

Fry  v.  Potter,  190,  205. 
Fuller  v.  McHenry,  52. 

v.  Percival,  215. 

Fulmer's  Appeal,  136,  278. 
Fulton  v.  Central  Bank,  426. 

v.  Hughes,  446. 

Furnace  Eun  Co.  v.  Heller,  92. 
Furst  v.  Armstrong,  407. 

G. 

Gable  v.  Williams,  402. 
Gadsden  v.  Carson,  445. 
Gage  v.  Parmlee,  116. 
Galbraith  v.  Tracy,  158,  402,  403. 
Gallagher's  Appeal,  445. 
Gallway  v.    Mathew,   242. 
Gammon  v.  Huse,  116. 
Gant  v.  Reed,  410. 
Gardner  v.  Minneapolis,  22. 
Garland,  Ex  parte,  407. 


458 


TABLE   OF    CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Garnett  v.  Eichardson,  23. 
Garr.  v.  Eedman,  16. 
Garth  v.  Davis,  61. 
Garver  v.  Kent,  232. 
Gasely  v.  Society,  32. 
Gaston  v.  Drake,  44. 
Gates  v.  Beeeher,  271,  423. 

v.  Watson,   308. 

Gathright  v.  Fulton,  373. 
Gavin  v.  Walker,  287,  296. 
Gay  v.  Householder,  175. 

v.  Johnson,   49. 

v.  Eay,  450,  461. 

v.  Seibold,   121. 

v.  Waltman,  252. 

George  v.  Benjamin,  329. 
Gerard  v.  Bates,  148,  230. 

v.  Gateau,  377,  378. 

Gerli   v.    Poidebord    Silk  Mfg.    Co., 

274. 

Getehell  v.  Foster,  120,  122. 
Gefuert  v.  Gille,  372. 
Gibbs'  Estate,  Ee,  4,  19,  23,  66. 

v.  Humphrey,   394,   460. 

Gibson  v.  Lupton,  13. 

—  v.  Ohio  Farina  Co.,  220,  233. 
Gilbert,  In  re,  54.  , 

Gilbert  v.  Lichtenberg,  327. 
Gilchrist  v.  Braude,  258,  392. 
Gilkerson-Sloss  Com.  Co.  v.  Salinger, 

52. 

Gilk  v.  Hunt,  123. 
Gillet  v.   Shaw,  51. 
Gillilan  v.  Sun  Mut.  Ins.  Co.,  426. 
Gilman  v.  Vaughan,  182. 
Gilmore  v.  Ham,  426. 
Gilruth  v.  Decell,  271,  304. 
Ginterman  v.  Wishon,  328. 
Glade  v.  White,  217. 
Gleason  v.  White,  403. 
Glover  v.  Tuck,  214. 
Goddard-Peck    Grocery    Co.    v.    Mc- 

Cune,  443. 

Goddard  v.  Pratt,  372,  394. 
Godfrey  v.  White,  178. 


Goell  v.  Morse,  11,  14,  83. 
Goepper  v.  Kinsinger,  160. 
Goesele  v.  Bimeler,  32. 
Golding  v.  Brennan,  263. 
Goldsmith  v.  Eichold,  172. 

v.  Eichold  Bros.,  186. 

Goldstein  v.  Fox,  271. 

v.  Nathan,  61. 

Goldthwaite  v.  Janney,  160,  167. 
Gomez  v.  Higgins,  410. 

Good  v.  Bed  Eiver  Valley  Co.,  6. 
Goodenow  v.  Jones,  289. 

v.  Smith,    311. 

Goodspeed  v.  Plow  Co.,  425. 
Gordon  v.  Albert,  423. 

v.  Funkhouser,  263. 

v.  Gordon,  136. 

—  v.  Knott,   131. 

v.  Moore,   173. 

Gorman  v.  Davis,  397. 
Gosling  v.  Gaskill,  91. 
Gottschalk  v.  Smith,  16,  43. 
Goudy  v.  Werk,  316,  446. 
Gould  v.  Kendall,  46. 
Grace  v.  Smith,  86. 

Graf  ton  Bank  v.  Moore,  65. 
Grant  v.  Bannister,  141. 
Gray,  In  re,  455,  458. 
Gray  v.   Green,  423. 

v.  Hamil,  179. 

v.  Palmer,  32. 

v.  Smith,  225. 

v.  Ward,  257. 

Grant  v.  Bannister,  161. 

Gratz  v.  Bayard,  361. 

Graser  v.  Stellwagon,  272,  274. 

Great  Southern  Hotel  Co.  v.  Jones, 

35,  36,  280. 
Greeley  v.  Wyeth,  331. 
Green  v.  Baird,  425. 

v.  Beesley,  59. 

v.  Chapman,  196,  219. 

v.  Higham,  16. 

v.  State  Bank,  359. 

v.  Taylor,  316. 


459 


TABLE  OP   CASES 


[REFERENCES 

Green  v.  Butterworth,  453. 
Gregg  v.  Hord,  116. 

v.  James,  260.      • 

Greenburg  v.  Early,  400. 
Greenham  v.  Gray,  209. 
Greenslade  v.  Dower,  257. 
Greenville  v.   Greenville   Co.,  24. 
Greenwood  v.  Marvin,  6,  163. 
Griffin  v.  Orman,  322. 

v.  Buffum,  292. 

Gribben  v.  Maxwell,  51. 
Griggs  v.  Clark,  189. 
— —  v.  Swift,  400. 

Grinnan  v.  Baton  Kouge  Mills  Co. 

391,  394. 

Grissom  v.  Moore,  165. 
Griswold  v.  Haven,  250. 

v.  Waddington,  369,  388. 

Gross  v.  Davis,  190. 
Grossman  v.  Lewis,  373. 
Grosvenor  v.  Lloyd,  287,  397. 
Groth  v.  Kersting,  469. 

v.  Payment,  377. 

Grotte  v.  Weil,  428. 
Grover  v.  Smith,  331. 
Groves  v.  Wilson,  477,  481. 
Grow  v.  Seligman,  126. 
Grubbe  v.  Pierce,  429. 
Grubb's  Appeal,  161. 
Guccione  v.  Scott,  214. 
Guckert  v.  Hacke,  23,  24. 
Gueringer  v.  Creditors,  454. 
Guerinck  v.  Alcott,  53. 
Guiee  v.  Thornton,  63. 
Guidon  v.  Robson,  325. 
Guillon  v.  Peterson,  304. 
Guiterman  v.  Wishon,  121. 
Gulf  City  Co.  v.  Boyles,  77. 
Gunderson  v.  Hosterlick,  300. 
Gunn  v.  R.  R.  Co.,  53. 

Guy  v.  Donald,  3. 
Gwynn  v.  Duffield,  302. 


ARE  TO  SECTIONS] 


H. 


Hackett  v.  Multnomah  Ry.,  53. 

v.  Stanley,  79,  92. 

Hackley  v.  Patrick,  425. 

Haddock  v.  Grinnell  Mfg.  Co.,  478, 

484. 

Hage  v.  Campbell,  267,  444. 
Hagenbeck  v.  Arena  Co.,  83. 
Haggett  v.  Hurley,  4. 
Hahlo  v.  Mayer,  102,  103,  105,  106. 
Haig  v.  Gray,  402. 
Haines'  Estate,  451,  461. 
Haines  v.  Starkey,  392. 
>      Hale  v.  Spaulding,  311. 

v.  Wilson,  216. 

Haley  v.  Case,  301. 
Hall  v.  Allen,  341. 
v.  Clagett,  175. 

v.  Jones,  429. 

v.  Kimball,  219. 

v.  Lanning,     254,     271,     276, 

310,  311,  314. 

v.  Sonnover,  173. 

Hall's  Safe  Co.  v.  Herring-Hall- 
Marvin  Safe  Co.,  286. 

Haller  v?  Willamowicz,  174. 

Hallowell  v.  Blackstone  Bank,  7, 
313. 

Halsey  v.  Norton,  415,  417. 

Halstead  v.  Shepard,  272. 

Hamill  v.  Hamill,  269,  415. 

Hamilton,  In  re,  54,  456. 

Hamilton  v.  Buxton,  308. 

v.  Halpin,  32. 

Hammel  v.  Feigh,  60,  61. 
Hammond  v.  Paxton,  168. 
Hanchett  v.  Gardner,  272. 
Hancock  v.  Haywood,  402. 
Haney  v.  Creamery  Co.,  311. 
Haney  Mfg.  Co.  v.  Adams,  302. 

v.  Perkins,   276,   301. 

Hanna  v.  McLaughlin,  347. 

v.  Wray,  403. 

Hannaman  v.  Karrick,  178. 

460 


TABLE  OP   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Hannigan  v.  Allen,  319. 

Hanson  v.  Page,  148. 

Haralson  v.  Campbell,  308,  314. 

Hanway  v.  Eobertshaw,  164. 

Harbeck  v.  Papin,  311. 

Harker  v.  Brink,  310. 

Harlow  v.  La  Brum,  170,  373. 

Harman  v.  Johnson,  304. 

Harper  v.  Eaymond,  135. 

Harrill  v.  Davis,  23. 

Harris  v.  Baltimore,  257,  258,  267. 

v.  Carter,  182,  183. 

v.  Harris,   154,   177,  203. 

v.  Lloyd,  57. 

v.  Peabody,  455. 

v.  Visseher,  7,  446. 

Harrison  v.  Jackson,  263. 

v.  MeCormick,  333. 

v.  Tennant,  377. 

v.  Warren  Co.,  232. 

Harsheim  v.  Brestup,  273. 
Hart  v.  Alexander,  429. 

v.  Hiatt,  316. 

v.  Myers,   180. 

v.  Woodruff,  425. 

Hartley  v.  White,  272. 
Hartman  v.  Woehr,  31,  177. 
Hartnett  v.  Stilwell,  169. 
Hartney  v.  Gosling,  37. 
Harvey  v.  Adams,  276. 

v.  Ohilds,  79,  94. 

v.  Crickett,  415. 

v.  Me  Adams,  251. 

Hasbrouek  v.  Childs,  145,  472. 
Haskins  v.  Curran,  37,  211. 

v.  D'Este,  6,  120,  300. 

Haslet  v.  Strut,  276. 
Haslett  v.  Wotherspoon,  23. 
Hastings    Nat.    Bank    v.    Hibbard, 

298. 

Hatch  v.  Wood,  335,  336. 
Hatchett  v.  Blanning,  318. 

v.  Blanton,  154. 

Haven  v.  Mehlgarten,  206. 
v,  Wakefield,  219,  233. 


Haviland  v.  Chace,  478. 
Hawkins  v.  Capron,  402. 

v.  Mahoney,   453,   454,  458. 

v.  M,clntyre,  83. 

Hawn  v.  Land  Co.,  261. 
Hayes  v.  Bement,  219. 

v.  Hayes,  136,  473. 

Hayman,  Ex  parte,  460. 
Haynes  v.  Carter,  392. 
Hayward  v.  French,  258. 
Head,  In  re,  453,  457. 
Heartt  v.  Walsh,  260,  423,  424. 
Heaton,  Ex  parte,  270. 
Heaton  v.  Schaeffer,  271. 
Heath  v.  Morgan,  123. 

v.  Sansom,  397. 

v.  Waters,  178,  402. 

Heckman  v.  Manning,  311. 
Heffron  v.  Gage,  232. 

v.  Hanaford,   250. 

Heflebower  v.  Buck,  231. 
Heilbut  v.  Nevill,  331,  414. 
Helmer  v.  Smith,  13. 
Helmore  v.  Smith,  363. 
Henderson  v.  Farley  Nat.  Bk.,  148. 
v.  Goates,  150. 

Hendren  v.  Wing,  123,  150,  155. 
Hendricks  v.  Middlebrooks,  301. 
Hendry  v.  Turner,  396. 
Henkel  v.  Heyman,  23,  478. 
Hennessy  v.  Griggs,  372. 
Henning  v.  Raymond,  232. 
Henry  v.  Anderson,  162,  194. 

v.  Jackson,  190. 

Hepburn,  In  re,  451. 
Heran  v.  Hall,  136. 
Herbert  v.  Odlin,  270. 
Hercy  v.  Birch,  222. 
Hershfield  v.  Claflin,  148. 
Hess  v.  Lowrey,  301,  338. 
Hewitt  v.  Hayes,  402,  403. 
Heyman  v.  Heyman,  52,  362. 
Hibben  v.  Collister,  410. 
Hibbs  v.  Brown,  35. 
Hicks  v.  Wyatt,  319. 


461 


TABLE  OP  CASES' 


[REFERENCES  ARE  TO  SECTIONS] 


Hier  v.  Kaufman,  262. 
Higbie  v.  Etna  B.  &  L.  Ass'n,  27. 
Higgina  v.  Beauchamp,  241,  257. 
Higgins   Co.   v.    Higgina   Soap    Co., 

124. 
Hill  v.  Bell,  49. 

v.  Cornwall,  454,  458. 

v.  Draper,  444. 

v.  Fearis.   , 

v.  Palmer,  137,  208. 

v.  Postley,  253. 

Hilliker  v.  Francisco,  327. 

v.  Loop,  325. 

Hillock  v.  Traders'  Ins.  Co.,  266. 
Hilton  v.  Vanderbilt,  426. 
Hitchings  v.  Ellis,  72. 
Hitchcock  v.  Frackelton,  294. 
Hoag  v.  Alderman,  179. 
Hoaglin  v.  Henderson,  52,  148. 
Hoard  v.  Clum,  361. 
Hoare  v.  Dawes,  13. 

v.  Oriental  Bank,  450. 

Hobbs  v.  Chicago  Packing  Co.,  301. 

v.  Wilson,  427. 

Hocking  v.  Hamilton,  264. 
Hodge  v.  Twitchell,  170,  229. 
Hodgson  v.  Baldwin,  3,  35. 
Hoeflinger  v.  Wells,  291. 
Hoff  v.  Eogers,  331. 
Hoffmaster  v.  Hodges,  259. 
Hogan  v.  Hadzeik,  484. 
Hogendobler  v.  Lyon,  331. 
Hogg  v.  Hogg,  117. 
Hogman  v.  Westlecraft,  252. 
Holbert  v.  Keller,  421. 
Holbrook  v.  Chamberlin,  283. 

v.  Lackey,  402. 

v.  Nesbitt,   125. 

Holden  v.  Mensinger,  328. 

v.  Thurber,    175. 

Holladay  v.  Elliott,  377,  <380. 
Hollenbeek  v.  More,  304. 
Holmes  v.  Burton,  291. 

v.  Darling,  172. 

• v.  Janett,  153. 


Holmes  v.  McCray,  61. 

v.  Miller,  148. 

v.  Shands,  423. 

Holt  v.  Howard,  193. 

v.  Simmons,  256. 

Holton  v.  Holton,  445. 

v.  McPike,  270. 

Holyoke  v.  Mayo,  203. 
Homer  v.  Wood,  331. 
Hook  v.  Stone,  253. 
Homfray  v.  Fothergill,  225. 
Hood  v.  Eiley,  341. 
Hookham  v.  Pottage,  125. 
Hooper  v.  Lusby,  266. 
Horgan  v.  Morgan,  40. 
Horn  v.  City  Bank,  257. 
Hornaday  v.  Cowgill,  397. 
Horton's  Appeal,  415. 
Horton  v.  Bloedorn,  267. 

Horton    Mfg.    Co.    v.    Horton    Mfg. 

Co.,  126. 

Hoskins  v.  Dickinson,  193. 
Hoskinson  v.  Eliot,  256,  258. 
Hotchkiss  v.  Quarry  Co.,  37. 
Houston  v.  Brown,  341. 
Howard  v.  France,  217. 

v.  Paxton,  168. 

Howe  v.  Lawrence,  446,  455. 

v.  Shaw,  312,  338. 

v.  Thayer,  372,  394. 

Howe  City  Bank  v.  Widener,  318. 
Howe  Scale  Co.  v.  Wyckoff,  124. 
Howell  v.  Brodia,  30. 

v.  Harvey,  357,  373. 

v.  Kelly,  61. 

v.  Moore,  295. 

v.  Reynolds,  326. 

Howland  v.  Davis,  270. 

Howze  v.  Patterson,  77,  256,  258. 

Hoxie  v.  Chaney,  128. 

Hoyt  v.  Murphy,  341. 

Hubbard  v.  Matthews,  300,  369,  415, 

423. 
Hubbardston  Lumber  Co.  v.  Covert, 


6. 


462 


TABLE  OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Hubcnthal  v.  Kennedy,  2,89. 

Huber  v.  Martin,  22. 

Hudson  Real  Estate  Co.  v.  Tower, 

388. 

Huffman  Farm  Co.  v.  Busk,  260. 
Huger  v.  Cunningham,  145,  469. 
Huggins  v.   Huggins,  59. 
Hughes  v.  Allen,  166. 

v.  Boring,  330. 

v.  Ewing,  77. 

v.  Gross,  400,  403. 

Huiskamp  v.  Wagon  Co.,  444. 
Hulett  v.  Fairbanks,  16,  43. 
Hull  v.  Young,  263,  283. 
Humes  v.  Higman,  136. 

v.  O 'Bryan,  246. 

Humphries  v.  Chastain,  425. 
Hundley  v.  Farris,  186,  443,  453. 
Hunt  v.  Eogers,  427. 

Hunter  v.  Pfeiffer,  44,  46. 
Huntington  v.  Burdeau,  61. 
Hurley  v.  Walton,  15,  43. 
Hurt  v.  Clarke,  283. 

v.  Salisbury,  23. 

Hurst  v.  Brennen,  170,  172. 
Huston  v.  Cox,  37. 

v.  Neil,  163,  165. 

Hutchins  v.  Bank  of  Tennessee,  391. 
v.  Page,  129. 

Hutchinson  v.  Dubois,  148. 
v.  Nay,  129,  132,  402. 

v.  Smith,  304. 

Hutzler  v.  Phillips,  454. 
Hyde  v.  Ford  Co.,  328. 

v.  Moxie  Co.,  326. 

Hyer  v.  Richmond  Traction  Co.,  222. 
Hyre  v.  Lambert,  178. 
Hyrne  v.  Erwin,  301,  338. 
Hynes  v.  Stewart,  373. 

I. 

Ice  v.  Kilworth,  182. 
Iddings  v.  Pierson,  295. 
Ihmsen  v.  Lathrop,  106. 


Illinois  Malleable  Iron  Co.  v.  Reed, 

63,  72,  76. 
Imperial  Building  Co.  v.  Board  of 

Trade,  27. 

Ingols  v.  Plimpton,  341. 
Ins.  Co.  v.  Malone,  285. 
Insley  v.  Shire,  173. 
International   Trust   Co.  v.  Wilson, 

235. 

Iroquois  Rubber  Co.  v.  Griffin,  260. 
Irwin  v.  Williar,  246. 
v.  Nashville,    etc.,   B.    Co.,    3, 

83,  84. 

Isler  v.  Baker,  365. 
Ivy  v.  Walker,  201. 


Jacks  v.  Greenhaw,  297. 
Jackson,  Ex  parte,  319. 
Jackson  v.  Akron  Briek  Ass  'n,  44. 

v.  Clymer,  341. 

v.  Cornell,  445. 

-• v.  Dickinson,  188. 

v.  Hooper,  14,  16,  43,  92. 

v.  Lahee,  232. 

v.  McLean,  46. 

v.  Stopherd,  217. 

Jackson  Bank  v.  Durfey,  6,  443. 
Jacobs  v.  Pollard,  188. 

v.  Shorey,  59,  301. 

Jaffe  v.  Krum,  481,  483. 
Jaffray  v.  Jennings,  301,  314. 
Jaques  v.  Marquand,  304. 
Janney  v.  Springer,  185,  272,  274. 
Jarvis  v.  Brooks,  449. 

Jenness  v.  First  Nat.  Bk.,  404. 
Jensen  v.  Wiersma,  316. 
Jennings  v.  Baddeley,  386. 

v.  Pratt,  181,  194,  200. 

v.  Rickard,  170. 

Jeter  v.  Burgwyn,  79,  98. 
Jewison  v.  Diendonne,  108,  398. 
Jewett  v.  Meech,  444. 
Johnson's  Appeal,  170. 


463 


TABLE  OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Johnson  v.  Bernheim,  242. 

v.  Carter,  59,  81,  96. 

v.  Clark,  158. 

v.  Corser,  3. 

v.  Evans,  148. 

v.  First  Nat.  Bank,  123. 

v.  Gordon,  454. 

v.  Hogan,  161. 

v.  Jones,  428,  429. 

v.  Kaiser,  402. 

v.  King,  148. 

v.  Eobinson,  253. 

v.  Wilson,  203. 

v.  Wingfield,  148. 

v.  Young,  428. 

Johnston  v.  Bunheim,  279. 

v.  Crichton,  331. 

'  v.  Button,  242,  282. 

v.  Shirley,  146. 

v.  Trask,  259. 

Jones  v.  Aspen  Hardware  Co., 
29. 

v.  Beekman,  157. 

v.  Blair,  341. 

v.  Blun,  6,  7. 

v.  Davies,  14,  16,  43. 

v.  Dexter,  170,  229. 

v.  Gould,  14,  16,  43,  245. 

v.  Howard,  326. 

v.  Lloyd,  384. 

v.  Noy,  376. 

v.  Eose,  211. 

v.  Steamboat  Co.,  341. 

v.  Walker,  407. 

v.  Yates,  331. 

Jordan  v.  Kirkpatrick,  51. 

v.  Miller,  277. 

v.  Soule,  206. 

Joseph  v.  Herzing,  402. 
Judd  Oil  Co.  v.  Hubbell,  308. 
Judge  v.  Braswell,  37,  257. 
Juilliard  v.  Orem,  183. 
Jurgens  v.  Ittmann,  117,  376. 
Justice  v.  Lairy,  370. 


K. 


Kahn  v.  Smelting  Co.,  37,  57. 
Kaiser  v.   Lawrence  Savings  Bank, 

23. 

Kallenbach  v.  Dickinson,  425. 
Karrick  v.  Hannaman,  222,  224,  229, 

355,   357. 

Katz  v.  Brewington,  177,  226. 
Kaufman  v.  Kaufman,  410. 
Kayser  v.  Maugham,  16,  43,  170. 
Kearney  v.  Snodgrass,  319. 
Keck  v.  Fisher,  267. 
Keen  v.  Price,  45. 
Kefanver  v.  Price,  327. 
Kell  v.  Nainby,  325. 
Kelley  v.  Hurlbut,  397. 
Kellogg  v.  Moore,  212. 

v.  Olsen,  150. 

Kelly  v.  Bourne,  123,  155. 
23,      v.  Greenleaf,  175. 

v.  Eummerfield,  15. 

v.  Scott,  460. 

Kemmerer  v.  Kemmerer,  182. 
Kendall  v.  Hamilton,  308,  309,  411. 
Kennedy  v.  Bohannon,  397. 

v.  Lonabaugh,  44. 

v.  McFadden,  190. 

v.  Monarch  Mfg.  Co.,  225. 

v.  Porter;  278,  350. 

Kenney  v.  Altvater,  259. 

v.  Howard,  403. 

Kenny,  In  re,  114. 

Kentucky  Block  Coal  Co.  v.  Sewell, 

155. 
Kepler   v.   Erie  Dime   Savings   Co., 

154. 

v.  Savings  &  Loan  Co.,  167. 

Kerrick  v.  Stevens,  31,  63. 
Ketcham  Bank  v.  Hagen,  259. 
Ketchum  v.  Durkee,  446. 

Keyes  v.  Nims,  16. 
Kimberley  v.  Arms,  170,  278. 
Kincaid  v.  Wall,  443. 
King  v.  Chuck,  225,  410. 

464 


TABLE  OP   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


King  v.  Moore,  199. 
v.  White,  474. 

v.  Winants,  44,  46. 

Kingsbury  v.  Tharp,  64. 
Kinney  v.  Maher,  179. 
Kintrea  v.  Charles,  191. 
Kirby  v.  Cannon,  311. 

v.  Carpenter,  456. 

v.  Schoonmaker,  434. 

Kirk  v.  Garrett,  276. 

v.  Young,  329. 

Kirwan  v.  Kirwan,  429. 
Klosterman  v.  Hayes,  64. 
Knapp  v.  Edwards,  175. 

v.  Heed,  170. 

Knard  v.  Hill,  103. 

Knaus  v.  Givens,  181,  194,  200. 
Knoedler  v.  Glaenzer,  130. 
Knowlton,  In  re,  54. 
Knox  v.  Buffington,  235. 

v.  Gye,  402. 

Kock  v.  Endriss,  263. 
Kountz  v.  Holthouse,  318. 
Kreuger,  In  re,  106,  398. 
Kreuger  v.  Speith,  403. 
Kruschke  v.  Stefan,  140,  162. 
Kuhn,  In  re,  295.         x 
Kuhn  v.  Weil,  276. 
Kurner  v.  O'Neil,  444. 
Kuser  v.  Wright,  388. 

Kntz  v.  Dreibelbis,  205. 
Kyle  v.  Griffin,  172. 

L. 

Ladd  v.  Griswold,  436. 

La   Fayette    Land    Co.    v.    Caewell, 

153. 

Lafond  v.  Deems,  10. 
Laibl^  v.  Ferry,  407. 
Lamar  v.  Hale,  37. 
Lamb  v.  Eowan,  182. 
Lamb  Knit-Goods  Co.  v.  Lamb  Glove 

&  Mitten  Co.,  124. 
Lamont  v.  Fullam,  83. 

Mech.  Part.— 30  465 


La  Montagne  v.   Bank  of  N.  T., 

322,  427. 
Lane,  In  re,  451. 

v.  Bishop,  52. 

Laney  v.  Fiekel,  3. 
Lang  v.  Waring,  402. 
Lanier  v.  McCabe,  257. 
Lansing  v.  Bever  Land  Co.,  6,  34. 
Lapenta  v.  Lettieri,  355,  423. 
Larson  v.  Newman,  401. 
Lasher  v.  Cotton,  325. 
Lassiter  v.  Jackman,  179. 

v.  Stainbaek,  194. 

Lathrop  v.  Adams,  301. 
Latrobe  v.  Dietrich,  49. 

Latta  v.  Kilbourn,  30,  63,  170,  172, 

229. 

Laughlin  v.  Lorenz,  361,  403,  408. 
Law  v.  Cross,  327. 
Lawrence  v.  Clark,  190. 

v.  Fox,  319. 

Lawson  v.  Glass,  208. 
Lay  v.  Emery,  180. 
Leaf's  Appeal,  166. 
Leavitt  v.  Peck,  235,  242. 

v.  Windsor  Land  Co.,  79,  93, 

222,  226. 

Leckie  v.  Kothenbarger,  55. 
Ledford  v.  Emerson,  205. 
Lee  v.  Bradley,  316,  446. 

v.  First  Nat.  Bank,  241,  257. 

v.  Hamilton,  260. 

Leffler  v.  Rice,  258. 
Leggett  v.  Hyde,  79,  92. 

Lehigh  Val.  R.  Co.  v.  Dupont,  53. 
Leithauser  v.  Baumeister,  428. 
Lenow  v.  Fones,  166. 
Le  Page  Co.  v.  Russia  Cement  Co., 

126. 

Le  Roy  v.  Johnson,  122. 
Leserman  v.  Bernheimer,  469. 
Lesley  v.  Rosson,  205. 
Lesure  v.  Norris,  427. 
Letts-Fletcher  Co.  v.  McMaster,  267. 
Levi  v.  Karrick,  179. 


TABLE  OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Levi  v.  Latham,  257,  283. 
Levine  v.  Michel,  172,  226. 
Levy  v.  Walker,  126. 
Lewin  v.  Stewart,  61a. 
Lewis  v.  Culbertson,  402. 

v.  Langdon,  126. 

v.  U.  S.,  362,  461. 

Liberty  Bank  v.  Campbell,  331. 
Lieb  v.  Craddock,  66,  397. 
Ligare  v.  Peacock,  145,  178,  350. 
Lill  v.  Egan,  295. 

Lincoln  v.  Craig,  102. 
Linder  v.  Adams  County  Bank,  403. 
Lindth  v.  Crowley,  256,  279. 
Lindsay  v.  Eace,  158. 
Lindsey  v.  Stranahan,  178,  179. 
Lineweaver  v.  Slagle,  477,  478. 
Linton  v.  Hurley,  301. 
Little  v.  Caldwell,  402,  403. 
Little  v.  Hazlett,  366,  388. 
Livingston  v.  Roosevelt,  267. 
Lloyd,  In  re,  455. 
Lobeek  v.  Hardware  Co.,  127,  402. 
Locke  v.  Lewis,  239,  267,  272,  274, 
287. 

v.  Stearns,  301. 

Lockwood  v.  Beckwith,  172. 
Lodge  v.  Feudal,  456. 
Loeb  v.  Pierpoint,  253. 
Logan  v.  Dixon,  189,  403,  411. 

v.  Oklahoma  Mill  Co.,  11,  13, 

15,  83. 

v.  Trayser,  187,  190. 

Long  v.  Citizens  Bank,  29. 

v.  Garnett,  392. 

•  v.  Slade,  268. 

Loomis  v.  Barker,  313. 

v.  Wallblom,  6,  414. 

Looney  v.  Gillenwaters,  174. 
Lord  v.  Baldwin,  459. 

v.  Hull,  181,  227,  228. 

Lothrop  v.  Wightman,  417. 
Lott  v.  Young,  102,  111. 

Loudon  Savings  Society  v.  Savings 
Bank,  247. 


Louisville,  etc.,  Co.  v.  Barnes,  312. 
Louisville  E.  Co.  v.  Alexander,  52. 
Love  v.  Payne,  57,  318. 
Lovejoy  v.  Lovett,  114. 

v.  Spafford,    394. 

Lovell  v.  Beauchamp,  49. 
Loverin  v.  McLaughlin,  24,  29. 
Lowman  v.  Sheets,  274. 
Loy  v.  Alston,  187. 
Lucas  v.  Coulter,  318. 
Luddington  v.  Bell,  291,  429. 
Ludlow  v.  Cooper,  163. 
Lunt  v.  Stephens,  326. 
Lyman  v.  Lyman,  32. 

v.  Eyman,   175. 

Lyon  v.  Knowles,  83. 
Lyons  v.  Lyons,  173. 

v.  Murray,  187. 

Lynch  v.  Thompson,  259. 
Lyth  v.  Ault,  429. 

M. 

Mabbett  v.  White,  272,  274. 

Mack  v.  Engel,  182. 

Mackan  v.  Dann,  283. 

Macon    Exchange    Bank    v.    Tracy, 

402. 
Maddock  v.  Ostburg,  225,  410. 

v.  Skinker,  402. 

Madge  v.  Ping,  214. 
Maffet  v.  Leuckel,  291. 
Magee  v.  Magee,  43. 

Magilton    v.    Stevenson,    189,    195, 

472. 

Magovern  v.  Eobertson,  72,  79. 
Mair  v.  Glennie,  83. 
Major  v.  Hawkes,  260,  423. 

v.  Todd,  177,  351. 

Mallory  v.  Oil  Works,  53. 

v.  Eussell,  163,  165. 

Mandeville  v.  Courtright,  21. 
Manchester  Bank,  Ex  parte,  407. 
Manhattan  Co.  v.  Laimbeer,  23,  477, 

478. 


466 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Manley  v.  Taylor,  472. 
Mangels  v.  Shaen,  220. 
Manning  v.  Gasharie,  35. 

v.  Williams,   411. 

Marble  Co.  v.  Ripley,  222,  226. 
Markle  v.  Wilbur,  282. 
Markley  v.  Snow,  276. 
Marks  v.  Ghamos,  265,  290. 

v.  Hastings,  276,  302. 

Marlett  v.  Jackman,  361,  388,  404. 
Marquand  v.  N.  Y.  Mfg.  Co.,  364. 
Marsh's  Appeal,  174,  180. 
Marsh  v.  Davis,  61. 

v.  Wheeler,  241,  256,  392. 

Marshall  v.  Keach,  27. 

v.  Pinkham,  126. 

Martin  v.  Baird,  30,  31,  63. 

v.  Morris,  163. 

v.  Searles,  394. 

v.  Stubbings,   217. 

Marwick,  In  re,  455. 

Marx  v.  Culpepper,  328. 

Maryland    Nat.    Bank    v.    Hollings- 

worth,  126. 

Mason  v.  Connell,  355. 
v.  Eldred,  271,  294,  309,  310. 

v.  Sieglitz,   205. 

v.  Tiffany,  403,  411. 

Masters  v.  Brooks,  229. 
Matteson  v.  Nathanson,  404. 
Mattingly  v.  Stone,  178. 
Mattison  v.  Farnham,  361,  407. 
Matthews  v.  Adams,  182. 
Maugham  v.  Sharpe,  28,  155. 
Maxey  v.  Strong,  425. 
Maxfield  v.  Schwartz,  319. 
Maxwell  v.  Gibbs,  398. 

v.  Sherman,  127. 

Mayberry  v.  Willoughby,  425. 
Mayer  v.  Bernstein,  253. 

v.  Soyster,  52. 

Maynard  v.  Maynard,  179. 

v.  Richards,  178. 

Mayor  v.  Manhattan  Ey.  Co.,  22. 


McAlpine  v.  Millen,  15,  64,  74,  78, 

83,  175. 

McAreavg  v.  Magirl,  428. 
McAuley  v.  Cooley,  216. 
McCabe  v.  Sinclair,  227.    , 
McCall  v.  Moss,  116,  182. 
McCarney  v.  Lightner,  16,  81. 
McCarthy  v.  Seisler,  267. 
McCollum  v.  Carlucci,  209. 
McCord  v.  Callaway,  242. 
McCormick's  Appeal,  61. 
McCoy  v.  Brennan,  316. 

v.  Crossfield,  174,  191,  193. 

v.  Jacks,  428. 

McCruden  v.  Jonas,  451,  461. 
McCullough  v.  Sommerville,  264. 
McDoel  v.  Cook,  271. 
McDonald  v.  Campbell,  59,  65,  92. 

v.  Battle  House  Co.,  79. 

v.  Eggleston,  263. 

v.  Fleming,  3,  71,  72. 

v.  Holmes,  190. 

v.  Mackenzie,  341. 

McDonough  v.  Bullock,  83. 
McElroy  v.  Adams,  276. 

v.  Allfree,  456. 

McFadden  v.  Hunt,  219. 

v.  Jenkins,  127,  129. 

v.  Leeka,  3,  187,  195. 

v.  Shanley,  328. 

McFarland  v.  Crary,  271. 
McGahan  v.  Rondout  Bank,  283. 
McGill  v.  McGill,  403,  411. 
McGUvery  v.  McGilvery,  318. 
McGlensey  v.  Cox,  415. 
McGowan  Co.  v.  McGowan,  226. 
McGrath  v.  Cowen,  57,  267,  274. 
Mcllroy  v.  Adams,  302. 
McKenzie  v.  L'Amoureux,  329. 
McKee  v.  Coralt,  146. 
McKinley  v.  Lynch,  42. 
McKinnon  v.  McKinnon,  410. 
McLain  v.  Carson,  411. 
McLaughlin  v.  Daily  Telegraph  Co., 

51. 


467 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


McLaughlin  v.  Mulloy,  54. 
McLennan  v.  Hopkins,  23. 
McLinden  v.  Wentworth,  289. 
McMahon  v.  McClerman,  357. 
McMaster  v.  City  Nat.  Bank,  309. 
MeMullen  v.  Mackenzie,  65. 

v.  Hoffman,  44,  46. 

McMurtrie  v.  Gwiler,  469. 
McNair  v.  Platt,  331. 

v.  Wilcox,  331. 

McNeal  v.  Gossard,  256,  277. 
McNeely  v.  Haynes,  302. 

McNeil    v.    Congregational    Society, 

167. 

McNeish  v.  Oat  Co.,  361. 
McVicker  v.  Cone,  23. 
Mead  v.  Shepard,  251. 
Meador  v.  Hughes,  54. 
Meadows  v.  Mocquot,  136,  472,  473. 
Mechanics'   Ins.   Co.  v.  Biehardson, 

256. 

Medbury  v.  Watson,  330. 
Meech  v.  Allen,  148,  449,  463. 
Meehan  v.  Valentine,  6,  96. 
Meeker  v.  Thompson,  391. 
Megahan  v.  Bank  of  Eondent,  263. 
Mehlhop  v.  Bae,  49. 
Meinhart  v.  Draper,  3. 
Menage  v.  Burke,  123,  155. 
Menagh  v.  Whitwell,  143,  146,  416, 

443,  444. 

Meneely  v.  Meneely,  124. 
Merchants  Bank  v.  Johnston,  263. 
Merchants'  Nat.  Bk.  v.  Coyle,  51. 

v.  Wehrman  (69  Oh.  St.  160), 

53. 

v.  Wehrman  (167  IT.  S.  362), 

53. 
Meriden    Nat.    Bank    v.    Gallaudet, 

120. 

Merrall  v.  Dobbins,  79. 
Merrill  v.  National  Bank,  455. 
Merriman  v.  Barker,  294. 

v.  Mfg.  Co.,  319. 

Merritt  v.  Buckman,  311. 


Merritt  v.  Day,  425. 

v.  Williams,  391. 

Merriweather  v.  Hardeman,  474. 
Merry  v.  Hoopes,  128. 
Messner  v.  Lewis,  121. 

Metcalfe  v.  Bradshaw,  117,  172,  229. 

v.  Eycroft,  327. 

Methodist  Church  v.  Piekett,  19. 
Metropolitan  Bank  v.  St.  Louis  Dis- 
patch Co.,  128. 

Metropolitan   Nat.   Bank   v.    Sirret, 

478. 
Meyer,  In  re,  326. 

v.  Krohn,  54,  58,  392. 

v.  Parsons,  322. 

Mick  v.  Howard.  122. 
Mifflin  v.  Smith,  117. 
Miles  v.  Ogden,  273. 

v.  Schmidt,  225. 

Mickle  v.  Peet,  199, 
Miles  Co.  v.  Gordon,  83. 
Miller  v.  Bailey,  212. 

v.  Brigham,  364,  415. 

v.  Consolidated  Bank,  277. 

v.  Estill,  436. 

v.  Ewer,  23. 

v.  Ferguson,   61. 

v.  Freeman,  180,  193,  214,  229. 

v.  Hoffman,  403. 

v.  Hughes,  87. 

v.  Miller,  61. 

v.  Neimerick,   250,  425. 

v.  N.  O.  Fertilizer  Co.,  454. 

v.  Eapp,  58. 

v.  Sims,  49. 

v.  Waite,  316. 

Miller's    Eiver    Bank    v.    Jefferson, 

451. 

Millhiser  v.  McKinley,  447. 
Mills  v.  Barber,  274. 
v.  Gray,  205. 

v.  Eiggle,  291. 

Milmo  Nat.  Bk.  v.  Bergstrom,  397. 
Milnes  v.  Gery,  225. 


468 


TABLE  OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Co.    v.    Anglo-Calif.    Bank, 


388. 


Missaukee  Farm  Co.  v.  Ferris,  121. 
Missouri  Pac.  E.  Co.  v.  Smith,  327. 
Mitchell  v.  Fish,  46. 

-  v.  Greenwald,  271. 

-  v.  O'Neale,  4,  62. 

-  v.  Eeed,  170,  229. 

-  v.  Tonkin,  16,  43. 
Mitehell-Borne  Const.  Co.,  In  re,  81. 
Mix  v.  Shattuck,  295. 

Moffat  v.  Thompson,  435. 

Mohawk  Nat.  Bank  v.  Van  Nyck, 

287. 

Moist  's  Appeal,  260. 
Mokelumne     Hill     Mining     Co.     v. 

Woodbury,  23. 
Molen  v.  Orr,  326. 
Moley  v.  Brine,  49. 
Molineaux    v.    Eaynolds,    132,    163, 

469. 

Mollwo  v.  Court  of  Wards,  91. 
Mondamin  Bank  v.  Burke,  179. 
Monmouth  College  v.  Dockery,  301, 

304. 
Monroe  v.  Conner,  242. 

-  v.  Ezzel,  325. 

-  v.  Hamilton,   238,   364. 
Moody  v.  Lucier,  453. 

-  v.  Payne,  148.  , 

-  v.  Wilks,  349. 

Moore  v.  May,  35,  63,  235,  280. 

-  v.  Price,  377. 

-  v.  Eawson,  129,  229. 

-  v.  Steele,  364. 

-  v.  Stevens,   263,  277. 

-  v.  Thompson,  14. 

-  v.  Westbrook,  183. 
Moreau  v.  Saffarans,  123,  153. 
Morehouse  v.  Northrop,  301. 
Morgan  v.  Parrel,  64,  65,  79,  102, 

103,  247. 

-  v.  Nanea,  210. 

-  v.  Eandolph,  319. 

-  v.  Eichardson,  262. 


Morgan  v.  Schuyler,  125,  128,  130. 
Morganthau  v.  King,  341. 
Morgart  v.  Smouse,  61. 
Morison  v.  Moat,  225. 
Moritz  v.  Lavelle,  61. 
Morrill  v.  Bissell,  398. 

v.  Weeks,  227. 

Morris  v.  Griffin,  179. 

v.  Kearsley,  225,  410. 

v.  Morris,  456. 

v.  Peckham,  60,  222,  223. 

Morris  Run  Coal  Co.  v.  Barclay  Coal 

Co.,  53. 
Morrison  v.  Austin  Bank,  57. 

v.  Bennett,  46. 

v.  Blodgett,  148,  170,  363. 

v.  Dickey,  52,  55,  58. 

Morse  v.  Carpenter,  155. 
v.  Hutchins,  216. 

Pacific  Railway  Co.,  13,  140. 

Mosgrove  v.   Golden,   326. 
Mosier,  In  re,  458. 
Motley  v.  Wiekoff,  429. 
Moyer  v.  Drummond,  316. 
Mudd  v.  Bast,  423. 
Munsey  v.  Butterfield,  131. 
Munson  v.  Sears,  83. 
Munton  v.  Eutherford,  102. 
Murphy  v.  Crafts,  174,  191,  193. 

v.  Murphy,   410. 

v.  Warren,  136. 

Murray  v.  Blackledge,  155. 

v.  Herrick,  190. 

v.  Mumford,  402.  , 

v.  Murray,  326,  415,  417. 

Murrell  v.  Mandelbaum,  144. 
Murrill  v.  Neill,  453. 
Murtrey  v.  Allen,  232. 
Musselman's  Appeal,  129. 
Mutual  Fire  Ins.  Co.  v.  Hammond, 

327. 

Mycock  v.  Beatson,  373. 
Myers   v.    Council   Bluffs    Ins.    Co., 

266. 

v.  Electric  Co.,  418. 


469 


TABLE  OF   CASES 


[REFERENCES  ARK  TO  SECTIONS] 


Myers  v.  Kalamazoo  Buggy  Co.,  126. 

v.  Lewis,  301. 

N. 

Nail  v.  Mclntyre,  331. 

Nashua  Co.  v.  Moore,  24. 

Nason,  Ex  parte,  458. 

Nathanson  v.  Spitz,  310. 

National  Bank  v.  Cringan,  30,   63, 

121,  289. 
National     Cash     Register     Co.     v. 

Brown,  428. 

Nat.  Exchange  Bank  v.  Wilgus,  297. 
National   Shutter   Bar   Co.   v.   Zim- 
merman, 28. 
National  State  Bank  v.  Noyes,  257, 

258. 

National  Surety  Co.  v.  Winslow,  10. 
National    Union    Bk.    v.    National 

Mechanics'    Bk.,    154,    160,    161, 

167. 
National    Wire    Bound   Box   Co.    v. 

Healy,  170,  172. 
Natusch  v.  Irving,  134,  281. 
Neal  v.  Berry,  49. 

v.  Smith,  392. 

Neale  v.  Turton,  257. 
Nehrbross  v.  Bliss,  402. 
Neil  v.  Greenleaf,  217. 

Neilson   v.    Mossend    Iron    Co.,    17, 

225. 

Nelms  v.  McGraw,  83. 
Nelson  v.  Hill,  411. 
Nemeth  v.  Tracy,  256. 
New  v.  Wright,  226,  231,  377. 
New  Haven  Wire  Co.  Cases,  28. 
New  Market  Nat.  Bk.  v.  Locke,  453. 
New  York,  etc.,  Ins.  Co.  v.  Bennett, 

277. 

New  York  Nat.  Bank  v.  Crowell,  23. 
Newan  v.  Eldridge,  6. 
Newbigging  v.  Adam,  373. 
Newby  v.  Harrell,  199,  215. 
Newcomb-Endicott  Co.  v.  Fee,  23. 


Newell  v.  Cochran,  170. 
Newhall  v.  Buckingham,  148. 
Newman  v.  Bagley,  445. 

v.  Gates,  411. 

v.  Kuby,  211. 

Newsom  v.  Pitman,  215,  218. 
Nichol  v.  Stewart,  143,  435. 
Nicholls  v.  Buell,  29. 
Nichols  v.  Burcham,  163. 

v.  Murphy,   136. 

v.  Thomas,  239,  273,  274. 

Nicholson  v.  Moog,  392. 
Niday  v.  Hancy,  293. 

Nims,  In  re,  450. 
Nirdlinger  v.  Bernheimer,  58. 
Nixon  v.  Nash,  148. 
North  v.  Bloss,  335. 

v.  Madge,  262. 

North  Star  Co.  v.  Stebbins,  300. 
North  Penri.  Coal  Co.  's  Appeal,  289, 

291,  293. 

Northen  v.  Tatum,  173,  187. 
Northern   Bank   of    Ky.    v.    Keizer, 

454. 

Northern  Ins.  Co.  v.  Potter,  311. 
Norton  v.  Brink,  61. 
Norwalk  Nat.  Bk.  v.  Sawyer,  167. 
Nott  v.  Downing,  271. 
Noyes  v.   Crandall,  256. 

v.  Cushman,  12,  13. 

v.  New    Haven,    etc.,    B.    Co., 

242,  260,  261. 

v.  Ostrom,  196,  219,  233. 

Nussbaumer  v.  Becker,  397. 

O. 

Oakley  v.  Pasheller,  428. 
Oakman  v.  Ins.  Co.,  402. 
O'Brien  v.  Foglesong,  123. 

v.  Smith,   199. 

O'Connell  v.  Schwanabeck,  403. 
Odom  v.  Denny,  294. 

O'Donnell  v.  Battle  House  Co.,  83. 
Ogden  v.  Arnot,  269,  363,  415. 


470 


TABLE  OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


O 'Gorman  v.  Fink,  316,  446. 

Olcott  v.  Little,  294. 

Old    Corner    Bookstore    v.    Upham, 

131. 

Oliphant  v.  Markham,  267. 
Oliver  v.  Forrester,  403. 
v.  Gray,  11,  73. 

v.  House,  474. 

Olleman  v.  Keagan,  403,  456. 
Olson  v.  Lamb,  341. 

v.  Morrison,  448. 

O'Neal  v.  Judsonia  Bank,  269. 
Osborn  v.  McBride,  146. 
Osborne  v.  Barge,  267. 

v.  Thompson,  277. 

Osburn  v.  Farr,  49,  50. 
Oteri  v.  Scalzo,  373,  375. 
Overlook  v.  Hazzard,  394. 
Overton  v.  Tozer,  262. 
Owen,  Ex  parte,  414. 
Owen  v.  Meroney,  210. 
Owens  v.  Mackall,  407. 
Owensboro  Wagon  Co.  v.  Bliss,  23. 


P. 


Page  v.  Brant,  335. 

v.  Citizens  Banking  Co.,  339. 

v.  Cox,  225. 

v.  Morse,  49. 

v.  Thomas,  158. 

v.  Wolcott,  423. 

Paige  v.  Paige,  154,  158,  165. 
Paine  v.  Moore,  193,  218. 

v.  Thacker,  178,  217. 

Palmer  v.  Dodge,  425,  426. 

v.  Scott,  304. 

Parchon  v.  Anderson,  79,  98. 
Parker  v.  Bowles,  158,  160. 

v.  Butterworth,  425. 

v.  Canfield,  92. 

v.  Macomber,  201. 

v.  Merritt,  436. 

Parsons  v.  Tillman,  451. 
Patrick  v.  Weston,  37. 


Patten  v.  Cunningham,  310. 
Patterson  v.  Atkinson,  146,  267. 

v.  Byers,  328. 

v.  Lily,  278. 

v.  Ware,  227. 

Pattison  v.  Blanchard,  83. 
Patton  v.  Carr,  402. 

v.  Leftwieh,  403. 

Patty-Joiner  Co.  v.  City  Bank,  44, 

46. 
Payne  v.  Dexter,  304. 

v.  Matthews,  456. 

v.  O  'Shea,   341. 

v.  Thompson,  52. 

Peacock  v.  Peacock,  145,  357. 
Peacocks  v.  Cummings,  282. 
Peaks  v.  Graves,  330. 
Pearce  v.  Ham,  229. 

v.  Sutherland,  372. 

Pearson  v.  Keedy,  411,  431. 
Pearpoint  v.  Graham,  357. 
Pease  v.  Cole,  241,  257. 
Peasler  v.  Sanborn,  316. 
Peck,  Matter  of,  6,  7,  458. 
Peckham  Iron  Co.  v.  Harper,  302. 
Peirce  v.  Weber,  263. 

Pelletier  v.  Couture,  49. 
Pendleton  v.  Cline,  121. 
Penn  v.  Folger,  271,  304. 

v.  Kearney,  265,  290. 

Pennington  v.  Todd,  228. 
Pennoyer  v.  David,  250,  425. 
Pennybacker  v.  Leary,  61. 
People  v.  Coleman,  6,  35,  280. 
v.  Paisley,  337. 

v.  Remington,  455. 

v.  Sugar  Refining  Co.,  53. 

People's  Bank  v.  Shryock,  148. 
People's  Bank  v.  Wilcox,  403. 
People's  Nat.  Bank  v.  Hall,  314. 
Peoria  Ins.  Co.  v.  Hall,  266. 
Pepper  v.  Peck,  444. 

v.  Thomas,  158. 

Percifull  v.  Platt,  153. 
Perens  v.  Johnson,  148. 


471 


TABLE  OF   CASES 


[REFERENCES  AKE  TO  SECTIONS] 


Perkins  v.  Butler  Co.,  423. 
Persons  v.  Oldfield,  277. 
Peters  v.  Bain,  453. 

v.  Dans,  402. 

v.  McWilliams,  318. 

Peterson  v.  Armstrong,  240. 

v.  Humphrey,  125. 

v.  Roach,  289. 

Petrie  v.  Torrent,  16. 
Pettis  v.  Atkins,  23,  280. 
Petty  v.  Brunswick  By.  Co.,  24. 
Pettyjohn  v.  Woodruff,  454. 
Pettyt  v.  Janeson,  115. 
Peyser  v.  Myers,  318,  444. 
Peyton  v.  Lewis,  322,  427. 
Pfeffer  v.   Steiner,  402. 
Pfeuffer  v.  Maltby,  228. 
Phelps  v.  Brewer,  254,  276. 

v.  McNeely,  443. 

Phillips  v.  Blatchford,  9,  35,  187. 

v.  Furniture  Co.,  267. 

v.  Phillips,  4. 

v.  Eeeder,  346. 

v.  Reynolds,  16. 

v.  Stanzell,  241,  256,  257. 

v.  Thoys,  274,  331. 

v.  Trezevant,  231. 

Phipps  v.  Little,  256. 
Phoenix  Ins.  Co.  v.  Miller,  331. 
Pickels  v.  McPherson,  246. 
Pico  v.  Cuyas,  199. 

Pierce  v.  Jackson,  449. 

v.  Scott,  175. 

v.  Ten  Eyck,  427. 

v.  Trigg,   6. 

Pierson  v.  Hooker,  261. 

Pike 's  Peak  Co.  v.  Pf  untner,  170. 
Pilcher,  Succession  of,  6. 
Pillsbury    v.     Pillsbury    Washburn 

Co.,  124. 

Pinckney  v.  Keyler,  341. 
Pinson,  In  re,  111. 
Pirtle  v.  Penn,  145,  226,  229. 
Pitkin  v.  Benfer,  287,  296,  397. 

v.  Pitkin,  407. 


Pittsburg  V.  F.  &  C.  Co.  v.  Klingel- 

hofer,  286. 

Place  v.  Sweetzer,  148. 
Platt  v.  Colvin,  329. 
Plummer  v.  Stuby  Co.,  24. 
Podrasink  v.  Martin,  397. 
Poillon  v.  Secor,  105. 
Polk  v.  Buchanan,  87. 

v.  Oliver,  394. 

Pollard  v.  Stanton,  81. 
Pollock  v.  Dunning,  123. 
Pomeroy  v.  Benton,  175. 
Pond  v.  Kimball,  316. 
Poole  v.  Hintrager,  319. 
•*— —  v.  Koons,   173. 

v.  Munday,   409. 

Pooley  v.  Driver,  1,  2,  6,  91. 

v.  Whitmore,  257. 

Pope  v.  Cole,  411. 
v.  Randolph,   203. 

Porch  v.  Arkansas  Milling  Co.,  316. 
Porter  v.  Baxter,  428. 

v.  Curry,  259,  283. 

Post  v.  Kimberly,  59. 
Potter  v.  Greene,  65. 

v.  Tolbert,  426. 

Powell  Co.  v.  Finn,  35. 

Power  Grocery  Co.  v.  Hinton,  135. 
Powers  v.  Silberstein,  428. 
Pratt  v.  Langdon,   87. 

v.  McGuinness,  146. 

Prentice  v.  Elliott,  182,  260. 
Prentiss  v.  Sinclair,  398. 
Preston  v.  Fitch,  144. 

v.  Garrard,  428. 

President,  etc.,  of  Adams  Bank  v. 

Rice,  59. 
Price  v.  Alexander,  79,  264. 

v.  Matthews,    126. 

v.  Spencer,  219. 

Prince  v.  Crawford,  257,  258,  279. 
Prosser  v.  Hartley,  316. 
Providence  v.  Bullock,  157. 
Pugh  v.  Holliday,  326,  415. 
Pullen  v.  Whitfield,  411. 


472 


TABLE  OF  CASES 


[REFERENCES  ABB  TO  SECTIONS] 


Pulliam  v.  Schimpf,  83. 
Purple  v.  Farrington,  186,  443. 
Purviance  v.  Sutherland,  264. 
Purvines  v.  Champion,  217. 
Purvis  v.  Butler,  92. 
Putnam  v.  Wise,  15,  83. 

Q. 

Quackenbush  v.  Sawyer,  11,  14,  83 

Queen  v.  Robson,  1,  2,  3. 

Queen  City  Furniture  Co.  v.  Craw 

ford,  23,  63. 
Quinn  v.  Quinn,  78 


B. 


Radeliffe  v.  Varner,  235. 
Railsback  v.  Lovejoy,  170. 
Bains  v.  Weiler,  179. 
Bainwater  v.  Childress,  23. 
Balston  v.  Moore,  411. 
Eammelsberg  v.  Mitchell,  129,  402. 
Ramsay  v.  Meade,  208,  209. 
Rand  v.  Nutter,  294. 

v.  Wright,  361. 

Randall  v.  Johnston,  148. 

v.  Merideth,  241. 

Bandle  v.  Richardson,  189. 
Randolph  v.  Daly,  314. 
Ranft  v.  Reimers,  131. 
Rankin  v.  Newman,  410. 
Ransom  v.  Vandeventer,  444. 
Rapp  v.  Latham,  250. 
Ratcliffe  v.  Mason,  165. 
Ratzer  v.  Ratzer,  4. 
Rawson  v.  Taylor,  428. 
Raymond  v.  Patnam,  54,  145,  469. 

v.  Vaughn,  365,  376. 

Read  v.  Bailey,  456. 

v.  Mackay,  129,  130. 

v.  Smith,  46. 

Beams  v.  Taylor,  51. 
Beddington  v.  Franey,  436. 
Redenbaugh  v.  Kelton,  289. 


Redfield   v.   Gleason,   178. 
Redlon  v.  Churchill,  256,  277. 
Beed  v.  Bacon,  278,  458. 
v.  Cremer,  65. 

v.  Gould,  215,  330,  331. 

v.  Meagher,  30,  37,  63. 

Beece  v.  Hoyt,  415. 

Beese  v.  Bradford,  446. 

Beid  v.  Hollingshead,  14,  272,  274, 

287. 

Eeilly  v.  Woolbert,  227. 
Beirden  v.  Stephenson,  250,  282. 
Beis  v.  Hellman,  215. 
Beiser  v.  Johnston,  205,  282. 
Bemick  v.  Emig,  403. 
Bemington  v.  Allen,  199,  203. 
Benfro  v.  Adams,  271. 
Benton  v.  Chaplin,  415. 
Beyburn  v.  Mitchell,  186,  291,  441, 

443. 

Beynell  v.  Lewis,  29. 
Beynolds  v.  Cleveland,  292. 

v.  Johnson,   443. 

v.  Pool,  15,  83. 

v.  Swain,  290. 

Bice,  In  re,  451. 

v.  Angell,  129. 

v.  Barnard,   32,  449. 

v.  Culver,  216. 

v.  Johnson,  235,  244. 

v.  Bockefeller    40. 

v.  Van  Why,  338. 

Richard  v.  Allen,  148,  271. 
Richards  v.  Butter,  394. 
v.  Grinnell,  61. 

v.  Le  Veille,  442. 

v.  Minnesota     Savings     Bank, 

22. 

v.  Todd,  373. 

Bichardson,  Ex  parte,  407. 

v.  Farmer,  287. 

v.  Gregory,    350. 

v.  Hughitt,  79. 

v.  Moies,  425. 

v.  Bedd,  316,  402. 

473 


TABLE  OF  CASES 


[REFERENCES  ABE  TO  SECTIONS] 


Bicker  v.  American  L.  &  T.  Co.,  6. 
Eickman  v.  Eickman,  271. 
Eiddell  v.  Bamsey,  215. 
Biddle  v.  Whitehill,  154,  158,  363. 
Eidenour  v.  Mayo,  29. 
Eider  v.  Hammell,  64. 
Biedeburg  v.  Schmitt,  58. 
Bingo  v.  Wing,  318. 
Bingolsky  v.  Mining  Co.,  29. 
Bipley  v.  Colby,  122. 
Eittenhouse  v.  Leigh,  102. 
Eizen  v.  James,  105. 
Boach  v.  Bannon,  402,  403. 

v.  Perry,    189. 

Bobards  v.  Waterman,  267. 
Bobb  v.  Mudge,  425. 
Bobbins  v.  Kimball,  61. 

v.  Laswell,  81,  82. 

Boberts  v.  Eldred,  158. 
v.  Johnston,  312. 

v.  McCarty,  161. 

v.  McKee,  226. 

Eobertson  v.  Corsett,  6. 
Eobinson  v.  Anderson    145. 

v.  Bullock,  83. 

v.  Floyd,   392. 

v.  Goings,  302. 

v.  Magarity,  121. 

v.  Boos,  322. 

v.  Security  Co.,  454. 

v.  Simmons,  178,  407,  409. 

v.  Storm,   124. 

v.  Wilkinson,  287. 

Bobinson  Bank  v.  Miller,  141,  158, 

160,  161,  168. 
Boby  v.  Colehour,  170. 
Bock  v.  Collins,  267,  283. 
Eocky  Mt.  Nat.  Bank  v.  McCaskill, 

391. 
Bocky  Mt.  Stud  Farm  Co.  v.  Lunt, 

13. 
Bodgers  v.  Clement,  182,  183. 

v.  Meranda,  453. 

Bogers  v.  Batchelor,  331. 

v.  Betterton,  185,  272,  274. 


Bogers  v.  Baynor,  330. 

v.  Bogers,  124,  196,  233. 

Eoger-Williams    Nat.    Bk.    v.    Hall, 

194. 

Eohlfing  v.  Carper,  319. 
Eolfe  v.  Dudley,  276. 
Eollins  v.  Stevens,  277. 
Boop  v.  Herron,  6. 
Eose  v.  Coffield,  392. 
Bosenbaum  v.  Hayden,  6. 
Bosenblatt  v.  Weinman,  59. 
Eosenfield  v.  Haight,  79. 
Eosenkrans  v.  Barker,  276,  302. 
Bosenstein  v.  Burns,  375,  377,  380. 
Boss  v.  Burrage,  16,  79. 

v.  Henderson,  158. 

Bothwell  v.  Humphreys,  258. 
Bouse  v.  Bradford  Banking  Co.,  428. 

v.  Wallace,  122,  295,  450. 

Bouse,    Hazard    &    Co.    v.    Detroit 

Cycle    Co.,    36. 

Bovelsky  v.  Brown,  163,  268,  275. 
Eowland  v.  Estes,  397. 
Eowell  v.  Bowell,  129. 
Euby,  In  re,  403,  456. 
Buffin,  Ex  parte,  436,  446. 
Buffner  v.  Hewitt,  423. 

v.  McConnell,  164. 

Buggies  v.  Buckley,  178. 
Bumery  v.  MeCulloch,  253. 
Eumsey  v.  Briggs,  257,  296. 
Eush  v.  Thompson,  341. 
Eusling  v.  Brodhead,  402. 
Bussell  v.  Annable,  263. 

v.  Cole,  415. 

v.  Leland,  272. 

v.  McCall,  402. 

Eussia  Cement  Co.  v.  Le  Page,  126, 

124. 
Bust  v.  Burke,  341. 

v.  Chisholm,  403. 

Eutherford  v.   Hill,  23. 

v.  McDonnell,    274. 

Eyan,  In  Estate  of,  45,  188. 
Eyckman  v.  Manerud,  309. 


474 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Ryder  v.  Wilcox,  209,  214,  217. 
Ryerson  v.  Hendrie,  308. 

S. 

Sabel  v.   Savannah   Kail   &   Equip. 

Co.,  30,  63. 

Sabine  Tram  Co.  v.  Bancroft,  53. 
Sadler  v.  Nixon,  203. 
Sage  v.  Ensign,  425. 
Sailors  v.  Nixon-Jones  Printing  Co., 

59,   70,   73. 
St.  Louis,  etc.,  Co.  v.  International, 

etc.,  Co.,  316. 

St.  Paul  Trust  Co.  v.  Fineh,  183. 
Salinas  v.  Bennett,  50. 
Salisbury  v.  Ellison,  403. 
Salmon  v.  Davis,  260. 
Salter  v.  Ham,  79. 
Salt  Lake   Brewing  Co.   v.   Hawke, 

258,  277,  278,  279. 
Samstag  v.  Ottenheimer,  298. 
Sanborn  v.  Eoyce,  148. 
Sanders  v.  Schilling,  52. 
Sands  v.  Durham,  428. 
Sandusky,  In  re,  148,  463. 

v.  Sidwell,  333. 

Sanger  v.  French,  60,  227. 
Sangston  v.  Hack,  117. 
Sargent  v.  Blake,  443,  444,  447. 

v.  Henderson,  259. 

Satterthwait  v.  Marshall,  224. 
Saunders  v.  Reilly,  442,  450. 
Savage  v.  Putnam,  322. 
Sawyer  v.  First  Nat.  Bk.,  79. 

v.  Worthington,  78. 

Sayer  v.  Bennett,  376. 
Scarf  v.  Jardine,  108,  336. 
Scarlett  v.  Snodgrass,  52. 
Scekell  v.  Fletcher,  297. 
Scharringhausen  v.  Luebsen,  410. 
Schele  v.  Wagner,  257. 

Schlau  v.  Enzenbacker,  403,  421. 
Schmertz  v.  Spreeve,  263. 
Schmidlapp  v.  Currie,  444. 


Schmidt  v.  Archer,  361. 
Schneider  v.  Sansom,  274. 

v.  Schmidt,  264. 

Schumacher  v.  Telephone  Co.,  3,  241, 

257. 

Schwartz  v.  Marcuse,  328. 
Schweppe  v.  Wellauer,  123. 
Scott  v.  Bryan,  190. 

v.  Campbell,  211. 

v.  Conway,  335. 

v.  Rayment,    222. 

Scudder  v.  Ames,  116. 
Seabury  v.  Crowell,  107. 
Seaman  v.  Apcherman,  265. 
Sears  v.  Starbird,  190. 

Seattle  Board  of  Trade  v.  Hayden, 

52. 
Second  Nat.  Bk.  v.  Burt,  291,  450, 

461. 

Seeberger  v.  Wymans,  277. 
Seeley  v.  Mitchell,  167. 
Seger's  Sons  v.  Thomas  Bros.,  443. 
Seighortner  v.  Weissinborn,  377. 
Selden  v.  Hall,  478. 
Seldner   v.    Mt.   Jackson  Nat.   Bk., 

423. 
Seligman  v.  Friedlander,  411. 

v.  Heller,  342. 

Selwyn  v.  Waller,  16. 

Serviss  v.  McDonnell,  318,  319. 

Setzer  v.  Beale,  58. 

Seifert  v.  Gille,  394. 
Sexton  v.  Anderson,  441,  443. 
Sewell  v.  Cooper,  217. 
Seymour  v.  Harrow  Co.,  121. 
Seymour  v.  Railroad  Co.,  325. 
Shackelford  v.  Williams,  43. 
Shaffer  v.  Martin,  304. 
Shamberg  v.  Ruggles,  397. 
Shamp  v.  Meyer,  319. 
Shanks  v.  Klein,  154,  164,  169,  402. 
Shannon  v.  Wright,  226,  231. 
Shapard  v.  Hynes,  398. 
Shapleigh   Hardware   Co.   v.   Wells, 
428. 


475 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Sharp  v.  Hutchinson,  481. 
Shattuck  v.  Chandler,  253,  403,  405. 

v.  Lawson,  213. 

Sharer  v.  Sharer,  126. 
Shaw,  et  al.,  Appellants,  405,  408. 
Shaw  v.  MeGregory,  319. 
Shea  v.  Donahue,  136,  473. 
Shearer  v.  Shearer,  163,  166. 
Sheble  v.  Strong,  478. 
Sheldon  v.  Bigelow,  103. 
Shelton  v.  Johnson,  388. 
Shepard  v.  Pratt,  79,  98. 
Sheppard  v.  Boggs,  129. 

—  v.  Bridges,  322,  427. 
Sherburne  v.  Hyde,  308. 
Sheridan  v.  Medara,  87. 
Sherman  v.  Kreul,  411. 
Sherrod  v.  Langdon,  108,  398. 
Sherry  v.  Gilmore,  123,  153. 
Sherwood  v.  Snow,  256,  258,  277. 
Shield  v.  Adkins,  30. 
Shirk  v.  Shultz,  49. 
Shrader  v.  Downing,  172. 
Shropshire  v.  Adams,  60. 
Shurtleff  v.  Willard,  193. 
Sibley  v.  Parsons,  392. 
Siegel  v.  Chidsey,   362. 
Sigler  v.  Knox  County  Bank,  444. 
Sikes  v.  Work,  11. 
Sillitoe,  Ex  parte,  451,  456. 
Silverman  v.  Kristufek,  153. 
Silvers  v.  Foster,  300. 
Sinsheimer  v.  Skinner,  333. 
Simons  v.  Stuart,  225. 
Simonton  v.  McLain,  54. 
Simpson,  In  re,  410. 
Simpson  v.   Feltz,   87. 

-  v.  Miller,  203,  350,  364. 
Simroll  v.  O'Bannons,  194,  200. 
Sims  v.  Smith,  347. 
Sindelare  v.  Walker,  143,  146,  215, 

330. 

Singer  v.  Heller,  379. 
Singer  Mfg.  Co.  v.  June  Mfg.  Co., 

124. 


Singerly  v.  Fox,  232. 
Sivingston  v.  Eoosevelt,  240. 
Skillman  v.  Lachman,  37,  57. 
Skinner  v.  Dayton,  264,  355. 
Slack  v.  Suddott,  1£8,  129,  130. 
Sladen  v.  Lance,  235,  259. 
Slater  v.  Slater,  126. 
Sleech's  Case,  411. 
Sleeper  v.  Park,  40. 
Slemmer's  Appeal,  355. 
Slipper  v.  Stidstone,  402. 
Sloan  v.  Gibbes,  190. 

v.  Moore,  267,  274. 

v.  Wilson,  146. 

Slocomb  v.  De  Lizardi,  403. 
Smith  v.  Ayer,  407. 

v.  Ayrault,  187,  188. 

v.  Bailey,  108,  398. 

v  Black,   294. 

v.  Canfield,  123. 

v.  Cisson,   265. 

v.  Collins,   250,  256,   291. 

v.  Cooke,  333. 

v.  Cooper,  125. 

v.  Edwards,  436. 

v.  Everett,  129,  373. 

v.  Heineman,  446. 

v.  Hill,  105. 

v.  Jayes,  114. 

v.  Kemp,  211. 

v.  Kerr,  263. 

v.  Knight,  178. 

v.  Loring,   191. 

v.  Moynihan,  66. 

v.  Eichmond,  44. 

v.  Sheldon,  428. 

v.  Sloan,  241,  257. 

v.  Smith,  443,  449. 

v.  Texas,  28. 

v.  Vandenburg,  371. 

v.  Walker,  127. 

v.  Weston,   277. 

Smith  Lumber  Co.  v.  Fitzhugh,  411. 

Snell  v.  Dwight,  46. 

Sniders'  Sons  Co.  v.  Troy,  27. 


476 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Snively  v.  Matheson,  257. 

Snyder    Mfg.    Co.    v.    Snyder,    126, 

129. 

Society  Perun  v.  Cleveland,   19. 
Sodiker  v.  Applegate,  79,  98. 
Solomon  v.   Kirkwood,  355,  394. 
Somerby   v.   Buntin,   119j   222,   224. 
Somerset   Potters   Works   v.   Minot, 

451. 

Soper  v.  Fry,  262. 
Southern  Coal  Co.  v.  Smith,  316. 
Southern    Cotton    Oil    Co.    v.    Hen- 

shaw,  169. 
Southern    Fertilizer    Co.    v.    Reams, 

92. 

Southwick  v.  Allen,  372,  394. 
Spalding  v.  Oakes,  188. 
Spann   v.    Cockran,    319. 
Sparman  v.  Keim,  49. 
Sparrow  v.  Kohn,  121. 
Spaulding  v.  Stubbings,  72,  77,  79. 
Spaulding  Mfg.  Co.  v.  Godbold,  153. 
Spaunhorst  v.  Link,  364. 
Spear  v.  Newell,  203,  204,  229. 
Speer  v.  Bishop,  106. 
Spencer  v.  Jones,  16,  43. 
Sperry  v.  Tulley,  187. 
Spitz,  In  re,  316. 
Spofford  v.  Eowan,  342. 
Spotswood  v.  Morris,  35,  280. 
Sprout  v.  Crowley,  211. 
Staats  v.  Bristow,  143. 
Stables  v.  Eley,  108,  398. 
Stahl  v.  Osmers,  146,  443. 
Stampfle  v.  Bush,  403. 
Stanhope  v.  Swafford,  301. 
Stanton  v.  Westover,  446. 
Stanwood  v.  Owen,  407,  408. 
Staples  v.  Schmid,  302. 

v.  Sprague,  282. 

Starr  v.  Case,  402. 
State  v.  Merritt,  327. 

v.  Neal,  405. 

v.  Withrow,  403. 

State  Bank  v.   Kelly,  146. 


State  National  Bank  v.  Butler,  13. 
Starer  &  Abbot  Mfg.  Co.  v.  Blake, 

23,  26,  36. 

Stearns  v.  Houghton,  402. 
Stebbins  v.  Willard,  425. 
Stecker  v.  Smith,  259. 
Stegman  v.  Berryhill,  180. 
Steiner  v.  Peters  Store  Co.,  450. 
Stein  v.  Robertson,  189. 

v.  La  Dow,  253. 

Steinhart  v.  Fykrie,  253. 
Stephens  v.  Orman,  117. 

v.  Thompson,  291. 

Sterling  v.  Bock,  263,  264. 
Stern  v.  Warren,  16. 
Sternberg  v.  Larkin,  402. 
Stettauer  v.  Carney,  16. 
Stevens  v.  Faucet,  82. 

v.  Perry,  314,  463. 

Stevenson  v.  Aktiengesellschaft,  etc., 

369. 

v.  Erskine,  114. 

Stewart's  Case,  455. 
Stewart  v.  Brown,  316. 

v.  Robinson,  361,  408. 

v.  Todd,  52,  410. 

Stillman  v.  Harvey,  259,  265. 
Stirling  v.   Heintzman,  56. 
Stitt  v.  Lumber  Co.,  61,  351. 
Stockdale  v.  Ullery,  267. 
Stoddard  Mfg.  Co.  v.  Krause,  392. 
Stokes  v.  Hoffman  House,  232. 
Stone  v.  Clark,  114. 

v.  Wendover,  214,  235. 

Story  v.  Richardson,  330. 
Stout  v.  Baker,  314. 

v.  Ennis  Nat.  Bk.,  261. 

Stoutimore  v.  Clark,  24. 
Straffin  v.  Newell,  264. 
Strang  v.  Bradner,  301. 

v.  Thomas,  481. 

Streichen  v.  Fehleisen,  285. 
Strong  v.  Lord,  163. 

v.  Smith,  250. 

Stuart  v.  Stewart  Co.,  124. 


477 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Stumph  v.  Bauer,  136,  472. 
Stundon  v.  Dahlenberg,  43,  63,  64, 

247. 

Sturges  v.  Vanderbilt,  — . 
Suau  v.  Caffe,  52. 
Sugg  v.  Thornton,  310,  314. 
Sullivan  v.  Smith,  253,  269. 

v.  Visconti,   274. 

Summerson  v.  Donovan,  261. 
Suprenant,  In  re,  446. 
Sutro  v.  Wagner,  231. 

Button  v.  Mo.,  etc.,  Ry.  Co.,  14,  43, 
94. 

v.  Weber,  259. 

Suydam  v.  Barber,  294. 
Swan  v.  Steele,  287,  298. 
Swann  v.  Sanborn,  460. 
Sweeney  v.  Neely,  182,  25L 
Sweet  v.  Wood,  265,  285. 
Swift  v.  Green,  271. 

v.  Ward,  352,  359. 

Swigert  v.  Aspden,  393. 
Sykes  v.  Beadon,  46. 
Symonds  v.  Jones,  126. 


T. 


Taber-Prang    Art    Co.    v.    Durant, 

141,  161. 
Taft  v.  Buffam,  364. 

v.  Church,    250,    300. 

v.  Schwamb,    145,   472. 

Tankersley  v.  Norton,  351. 
Tanner  v.  Hall,  277. 

Tanner  Engine  Co.  v.  Hall,  106. 
Tapley  v.  Butterfield,  267. 
Tappen  v.  Bailey,  35. 
Tarbell  v.  Page,  23. 

v.  West,  167. 

Tasker  v.  Shepherd,  400,  403, 
Tate  v.  Clements,  278,  425. 

v.  Ins.  Co.,   326. 

Tattersall  v.  Nevels,  164. 
Taylor  v.   Thompson,   196. 
v.  Wilson,  460. 


Teague  v.  Lindsey,  443. 
Tebbetts  v.  Dearborn,  170,  229. 

v.  Rollins,  455. 

Teed  v.  Parsons,  3. 
Telfer,  In  re,  451,  456. 
Temple  v.  Seaver,  194. 
Tennant  v.  Dunlop,  129,  402. 
Tenney  v.  Simpson,  61. 
Terrill  v.  Richards,  210. 
Thayer  v.  Augustine,  79. 
v.  Badger,  178. 

v.  Goss,  106,  336,  394. 

v.  Humphrey,  448,  460. 

Theus  v.  Dugger,  52. 
Thillman  v.  Benton,  77. 
Thimsen  v.  Reigard,  16. 
Thomas  v.  Atherton,  187. 

v.  Hardsocg,  297. 

v.  Lines,  116. 

Thompson  v.  Emmert,  309. 

v.  First  Nat.  Bank,  102,  103, 

105,  106. 

v.  McKee,  61. 

v.  Percival,  429. 

v.  White,  308. 

Thornton  v.  Lambeth,  289. 
Thrall  v.  Seward,  116. 
Thropp  v.  Richardson,  213. 
Thurlow  v.   Warren,   316. 
Thwaites  v.  Coulthwaite,  45. 
Thynne  v.  Shove,  126. 
Tibbetts  v.  Shopleigh,  294. 
Tidd  v.  Rines,  153. 

Tilge  v.  Brooks,  478. 
Tillinghast  v.  Champlin,  169. 

v.  Gilmore,  252. 

Tillis  v.  Folmar,  428. 
Tisch  v.  Rockafellow,  407. 
Tischler  v.  Kurtz,  263. 
Tobey  v.  Bristol  County,  119. 
Todd  v.  Emly,  10. 

v.  Jackson,   304. 

v.  Lorah,  267,  272,  274. 

v.  Rafferty,  172. 

Tom  v.  Goodrich,  293. 


478 


TABLE  OP  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Tomlinson  v.  Broadsmith,  276. 
Tonge  v.  Item  Pub.  Co.,  23. 
Tootle  v.  Jenkins,  407. 
Topping,  Ex  parte,  457. 
Topping  v.  Paddock,  195. 
Torbert  v.  Jeffrey,  16,  76,  77. 
Towle  v.  Meserve,  203. 
Townley  v.  Crickenberger,  59. 
Townshend  v.  Goodfellow,  — . 

v.  Jarman,  125. 

v.  Long,  319. 

Trafford  v.  Hubbard,  148. 
Traphagen  v.  Burt,  61,  140. 
Treadwell  v.  Wells,  392.  ' 
Treat  v.  Hiles,  137,  208. 
Trego  v.  Hunt,  127,  131,  170. 
Trexlar  v.  Africa,  153. 
Trott  v.  Irish,  327. 
Troughton  v.  Hunter,  396. 
Tucker  v.  Cole,  270,  271. 
Tuckerman  v.  Newhall,  311. 
Tuite  v.  Tuite,  49. 

Turner  v.  Jaycox,  450. 

v.  Major,  225. 

Tutt  v.  Land,  182. 

Twin    City    Brief    Printing    Co.    v. 

Eeview  Pub.  Co.,  122,  126. 
Tyler  v.  Waddingham,  289. 
Tyrrell  v.  Washburn,  35,  322,  361. 

U. 

Uhler  v.  Browning,  122. 

Ullman  v.  Myriek,  272. 

Union  Bank  v.  Kansas  City  Bank, 
267. 

Union  Nat.  Bank  v.  Bank  of  Com- 
merce, 458. 

Union  Trust  Co.  v.  Shoemaker,  411. 

Updike  v.  Doyle,  319. 

United  States  v.  Adams  Express 
Co.,  35. 

v.  Astley,  293. 

U.  S.  v.  Lyman,  293. 

United  States  Bank  v.  Binney,  32, 
117,  292. 


United  States  Wood  Preserv.  Co.  v. 
Lawrence,  29,  102. 

V. 

Vaccaro  v.  Security  Bank  of  Mem- 
phis, 6. 

Vail  v.  Winterstein,  52. 

Valentine  v.  Wysor,  402,  474. 

Vance  v.  Blair,  214,  235. 

Vanderhurst  v.  De  Witt,  65. 

Van  Deusen  v.  Blum,  263. 

Vanhorn  v.  Corcoran,  478. 

Van  Keuren  v.  Parmelee,  425. 

v.  Trenton,  226,  357. 

Van  Kleeck  v.  Hammell,  102. 

v.  McCabe,  460. 

Vanneman  v.  Young,  23,  27. 

Vannerson  v.  Cheatham,  52. 

Vanness  v.  Dubois,  427. 

Van  Ness  v.  Forrest,  202. 

Varner's  Appeal,  474. 

Vernon  v.  Manhattan  Co.,  391. 

Vetsch  v.  Neiss,  241,  257. 

Vetterlein  v.  Barnes,  414. 

Vetterlein,  In  re,  450,  461. 

Vickers  v.  Vickers,  225. 

Viles  v.  Bangs,  260,  326,  331. 

Vincent  v.  Martin,  361,  408. 

Vinson  v.  Beveridge,  98. 

Volk  v.  Eoche,  193. 

Von  Bremen  v.  Mac  Monnies,  131, 
132. 

Vonderbank  v.  Schmidt,  126,  128, 
130. 

Voorhees  v.  Jones,  82. 

Voohris  v.  Child's  Exr.,  402. 

Voshnik  v.  Urquhart,  253. 

Vosper  v.  Kramer,  436. 

Vredenburg  v.  Behan,  21. 

W. 

Wade  v.  Hornaday,  16,  72,  59,  92, 


Wade  v.  Pope,  407. 
Wadsworth  v.  Manning,  222. 


479 


TABLE   OF  CASES 


[REFERENCES  ARE  TO  SECTIONS] 


"Waggoner  v.  First  Nat.  Bk.,  64,  79, 

98. 
Wagner  v.  Buntcs,  15. 

v.  Buttles,  83. 

v.  Simmons,  256. 

Wahl  v.  Barntim,  60. 
Wait  v.  Dodge,  325,  326. 
Waite  v.  Foster,  425. 

v.  Vinson,  272. 

Walker  v.  Bean,  252. 

v.  Herman,  146,  148. 

v.  Miller,  155. 

v.  Mottram,  132. 

v.  Sharpe,  271. 

v.  Steel,  326. 

v.  Stimmel,  121. 

v.  Wait,  6,  194,  200. 

v.  Walker,  257,  407. 

v.  Whipple,  351. 

Wall  v.  Boisgerard,  329. 

v.  London  Assets  Corp.,  282. 

Waller  v.  Davis,  364. 

v.  Keyes,  246. 

Wallerstein  v.  Ervin,  53. 
Walling  v.  Burgess,  169. 
Wain  v.  Hewes,  402. 

Walsh  v.  Lennon,  256,  258,  264. 
Walstrom  v.  Hopkins,  429. 
Waltham  Piano  Co.  v.  Pierson,  279, 
Wann  v.  McNulty,  294. 
Ward  v.  Barker,  276. 

v.  Johnston,  294. 

Warder  v.  Newdigate,  260. 
Ware  v.  Owens,  161. 
Warner  v.  Beers,  280. 
Warren  v.  Ball,  397. 

v.  Farmer,   455. 

v.  Martin,  272,  274,  287. 

v.  Taylor,  435,  452,  469. 

Warriner  v.  Mitchell,  295. 
Warring  v.  Arthur,  189,  190. 
Watson,  Ex  parte,  336. 
Watson  v.  Fletcher,  44. 
Watson  v.  Hinchman,  302. 

v.  McKinnon,  446. 


Watson  v.  Murray,  44. 
Watts  v.  Rice,  330. 

v.  Sayre,  342. 

Waugh  v.  Carver,  86. 
Waverly  Nat.  Bk.  v.  Hall,  79. 
Way  v.  Stebbins,  157,  158. 
Webber  v.  Webber,  261. 
Webb  v.  Fordyce,  175. 

v.  Hicks,  92. 

v.  Johnson,  58. 

Webster  v.  Clark,  64,  79,  103. 

v.  Webster,  126. 

Wechselberg  v.  Nat.  Bank,  29. 
Weeks  v.  Mascoma  Rake  Co.,  263, 

300. 

v.  McClintoek,  174,  179. 

Weiland  v.  Sell,  98. 

Weise  v.  Gray's  Harbor  Commercial 

Corp.,  372,  394. 
Welbourn  v.  Kleinle,  402. 
Weisenberg,  In  re,  450. 
Welch  v.  Miller,  205. 
Wells  v.  Ellis,  350,  363. 
Wells  v.  Mitchell,  215. 
Wendling  v.  Jennisch,  182. 
Wentzel  v.  Barbin,  131. 
Werner  v.  Calhoun,  394. 
Wessels  v.  Weiss,  92. 
West,  In  re,  455. 

v.  Citizens  Ins.  Co.,  326. 

v.  Kindrick,  342. 

v.  Valley  Bank,  6,  121. 

Western    Coal    Co.    v.    Hollenbeck, 

341. 

Western  Stage  Co.  v.  Walker,  423. 
Whaken  v.  Stephens,  379. 
Wheat  v.  Eice,  319. 
Wheatley  v.  Tutt,.  254. 
Wheeler  v.  Arnold,  187,  205. 

v.  Sage,  172. 

Wheeloek  v.  Zevitas,  110. 
Whelan  v.  Shain,  442,  450. 
Whigham's  Appeal,  146,  148. 
Whitcomb    v.    Converse,    136,    145, 

181,  183,  190,  472,  473. 

480 


TABLE  OF   CASES 


[REFERENCES  ARE  TO  SECTIONS] 


Whiteomb  v.  Whiting,  425. 
White  v.  Campbell,  330,  331. 

-  v.  Eiseman,  477,   478. 
White  v.  Eech,  327. 

• v.  Smith,  312,  375. 

v.  Thielens,  319. 

v.  Trowbridge,   126. 

v.  Tudor,  425,  426. 

White  Mt.  Bank  v.  West,  327. 
White  Star  Line  v.  Star  Line,  53. 
Whitewell  v.  Arthur,  376. 
Whiting  v.  Wyman,  23. 
Whitney  v.  Bank,  79. 

v.  Dewey,  170. 

Whittaker  v.  Collins,  301,  338. 

v.  Howe,  225. 

Whittenton  Mills  v.  Upton,  53. 
Whitworth  v.  Patterson,  459. 
Wiesenfeld  v.   Byrd,  407. 
Wiggin  v.  Goodwin.  427. 
Wiggins  v.  Bisso,  46. 

-  v.  Blackshear,  7,  443. 

v.  Markham,  172. 

Wilcox  v.  Derickson,  408. 

v.  Jackson,  253. 

Wild  v.  Davenport,  57,  407. 

v.  Milne,  143. 

Wiley  v.  Holmes,  294. 

v.  Wiley,  61. 

Wilhite  v.  Boulware,  157. 
Wilkins  v.  Pearce,  277. 
Wilkinson  v.  Eutherford,  232. 

v.  Tilden,  226. 

Willey  v.  Bank,  110,  274,  287,  341. 
Williams  v.  Farrand,  124,  126,  128, 
130. 

v.  Frost,  253. 

v.  Gillespie,  279. 

v.  Gillies,  14,  43,  245,  293. 

v.  Hendicks,  302. 

v.  Hurley,  6. 

v.  Lewis,  148,  250. 

v.  Pederson,   178. 

v.  Rogers,   15,   83,  308. 


Williams  v.  Southern  Pacific  E.  Co., 
326. 

v.  Whedon,  403. 

Williams  Nat.  Bk.  v.  Hall,  458. 
Williamson  v.  Barbour,  270. 

v.  Kokomo  B.  &  L.  Ass'n,  23. 

v.  Monroe,  170. 

v.  Nigh,  43. 

Willis  v.  Chapman,  280,  361,  380. 

v.  Crawford,  15. 

v.  Downs,  316. 

v.  Henderson,  148. 

v.  Jones,  330. 

v.  Sharp,  408. 

v.  Simmoiids,  214. 

Willson  v.  Morse,  44. 

v.  Nicholson,  402. 

Wilmot  v.  The  Quachita  Belle,  262. 
Wilson  v.  Carter  Oil  Co.,  53. 

v.  Cobb,  4. 

v.  Fitchter,  226. 

v.  McCarty,  183. 

v.  McCormick,  333. 

v.  Eichardson,  240. 

v.  Eobertson,  444. 

v.  Eunkel,  341. 

v.  Todhunter,  42,  65. 

v.  Wallace,  327. 

v.  Waugh,  359,  363,  426. 

v.  Welch,  232. 

v.  Wilson,  217. 

Winchester  v.  Glazier,  114,  179,  182, 

183. 

Winget  v.  Building  Ass'n.,  22,  24. 
Winship  v.  Bank  of  U.  S.,  235,  240, 

241,  256,  278,  287. 
Winslow  v.  Wallace,   186,  445,  458. 
Winstanley  v.  Gleyre,  43,  170. 
Winter  v.  Inness,  403,  411. 

v.  Pipher,   81. 

— —  v.  Stock,  123,  153. 
Wintermute  v.  Tarrant,  194,  200. 
Wipperman  v.  Stacy,  78,  242. 
Wishek  v.   Hammond,  45. 
Wisner  v.  Field,  178. 


Mech.  Part. — 31 


481 


TABLE  OF   CASES 


[REPEEENCES  AEE  TO  SECTIONS] 


Woelfel  v.  Thompson,  145. 
Wolf  v.  Mills,  301. 
Wolfe  v.  Joubert,  121. 
Wolff  v.  Madden,  318. 
Wood   v.   American   Fire   Ins.   Co., 
363. 

v.  Braddick,  425. 

v.  Humphrey,  225. 

v.  Luscount,  338. 

v.  Macafer,  319. 

v.  O 'Kelly,  325. 

v.  Pennell,  103,  104. 

v.  Kailroad  Co.,  121. 

v.  Watkinson,   271,  294,  310. 

v.  Wilder,  369. 

Woodman  v.  Boothby,  194,  §01. 
Woodmansie  v.  Holeomb,  444. 
Woodruff  v.  Scaife,  241. 

v.  Woodruff,  225. 

Woods  v.  Lamb,  117. 
Woodson  v.  Wood,  425. 
Woodward-Holmes     Co.     v.     Nudd, 

163,  165,  166. 
Woodward  v.  Lazar,  128. 

v.  Bennett,  44,  46. 

v.  McAdam,  123,  155. 

v.  Winship,  248. 

Woolsey  v.  Henke,  265. 

Worcester    Corn    Exchange,    In    re, 

187. 

Word  v.  Word,  231. 
Worthy  v.  Brower,  189 


Wray  v.  Wray,  155. 
Wrenshall  v.  Cook,  341. 
Wright  v.  Cudahy,  44,  46. 

v.  Herrick,  335,  336. 

v.  Stooker,  120. 

Wycoff  v.  Purnell,  203. 

Y. 

Yale  v.  Eames,  425. 

v.  Taylor  Mfg.  Co.,  121. 

Yates  v.  Lyon,  49. 

Yeager  v.  Wallace,  232,  242. 
Yeoman  v.  Lasley,  16,  43. 
Yerkes  v.  McFadden,  314. 
Yetzer  v.  Applegate,  173. 
Yoho  v.  MicGovern,  294. 
York  v.  Orton,  429. 
York  County  Bank's  Appeal,  449. 
Yorks  v.  Tozer,  176,  187,  191. 
Yorkshire  Banking  Co.  v.  Beatson, 

296. 
Young  v.  Clapp,  392. 

v.  Currier,  311. 

v.  Stevens,  51. 

Z. 

Zabriskie  v.  E.  E.  Co.,  281. 
Zanturjian  v.  Boornazian,  131. 
ZelPs  Appeal,  178. 
Zimmerman  v.  Erhard,  121. 
Zuber  v.  Eoberts,  59,  79. 


482 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 
ACCEPTANCE  (see  BILLS  AND  NOTES). 

ACCOMMODATION— 

partner  no  implied  power  to  bind  firm  for  accommodation  of  stranger, 
277. 

ACCOUNT  STATED— 

action  at  law  may  be  brought  upon,  when,  199. 

ACCOUNTING— 

who  may  demand,  230. 

in  what  court,  227-230. 

all  profits  and  advantages  must  be  accounted  for,  170. 

not  usually  ordered  of  illegal  transactions,  46. 

usually  had  only  on  dissolution,  227. 

basis  of,  465 

manner  of,  469. 

reopening  or  restating,  474. 

ACCOUNTS— 

duty  of  each  partner  to  keep,  175. 
presumption  against  partner  who  fails,  175. 

ACTIONS— 

respecting    partnership    transactions    not    usually    cognizable    at    law, 

199  et  seq. 

one  partner  cannot  sue  another  at  law,  when,  199-205. 
one  partner  can  sue  another  at  law,  when,  207-218. 
one  partner  cannot  sue  firm  at  law,  199. 
firm  cannot  sue  partner  at  law,  201. 
in  equity,  what  may  be  brought,  221-232. 
who  should  sue  in  actions  by  the  firm,  324-330. 
who  should  sue  in  actions  against  the  firm,  332-338. 
cannot  usually  be  brought  in  firm  name,  328. 

ADMINISTEATOE  (see  EXECUTOR). 

483 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

ADMISSIONS— 

partner  cannot  bind  firm  by,  when,  250. 

after  dissolution,  425. 

as  evidence  of  partnership,  65. 

power  to  make,  after  dissolution,  425. 

ADVERTISEMENT— 

of  dissolution,  see  NOTICE  OP  DISSOLUTION. 

AGENCY— 

as  a  test  of  partnership,  88-98. 
partner's,  for  the  firm,  244  et  seq. 

AGENT— 

of  the  implied  powers  of  partners  as  agents  for  the  firm,  244. 
power  of  partnership  to  be,  251. 
power  of  partner  to  appoint,  251. 
liability  of  firm  for  acts  of,  306. 

AGEEEMENT  BETWEEN  PARTNERS— 
action  for  breach  of,  207  et  seq. 
on  dissolution,  effect  of,  427-429. 

AGREEMENT  TO  ENTER  INTO  PARTNERSHIP— 
how  enforced,  208. 

AGREEMENTS— 

what  operate  to  create  partnership,  74-84. 

ALIEN— 

power  of,  to  be  a  partner,  48. 

APPLICATION  OF  ASSETS— 

how  assets  of  firm  to  be  applied,  438  et  seq. 
by  going  partnership,  441. 
by  court,  449-463. 

ARBITRATION— 

power  of  partner  to  submits  claims  to,  252. 

ARTICLES  OF  PARTNERSHIP  (see  PARTNERSHIP  ARTICLES). 
ASSETS  (see  PROPERTY;  APPLICATION- OP  ASSETS). 

ASSIGNMENT  FOR  CREDITORS— 
power  of  partner  to  make,  253. 
power  of  surviving  partner  to  make,  402,  403. 

484 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

ASSOCIATIONS— 

other  than  partnerships,  9,  16. 

ASSUMING  DEBTS— 
on  dissolution,  427. 
action  for  not  paying,  213. 

ATTORNEYS— 

power  of  partner  to  employ,  254. 

liability  of  firm  of,  for  partner's  negligence,  301. 

AUTHORITY  (see  POWERS  OF  PARTNERS). 

BANKRUPTCY— 

effect  of,  to  dissolve  the  firm,  362. 
notice  of,  necessity  for,  388. 

BILLS  AND  NOTES— 

implied  power  of  partner  to  make,  indorse  or  accept,  255-257. 
power  of  surviving  partner,  402,  403. 

of  partner  after  dissolution,  423. 

of  partner  in  non-trading  firm,  255-257. 

BREACH  OF  TRUST— 

liability  of  firm  for  partner's,  304. 

BURDEN  OF  PROOF— 
of  partnership,  66. 

BUYING  (see  PURCHASE). 

CAPACITY— 

to  be  partner,  see  PARTNER. 

CAPITAL— 

of  firm,  what  constitutes,  133. 
amount  and  interests  in,  134. 
in  what  contributed,  136. 
loss  of,  how  borne,  472. 

CARE  AND  SKILL— 

duty  of  partner  to  exercise,  173. 

CHANGE  IN  FIRM— 

operates  as  dissolution,  57. 

485 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

CLASSIFICATION— 

of  partners  and  partnerships,  32-41. 

CLUBS— 

are  not  partnerships,  10. 

COLLECTING  DEBTS— 

implied  authority  of  each  partner  for,  260. 

COMMITTEES— 

not  partnerships,  9,  10. 

COMMON  MEMBER— 

effect  where  two  firms  have,  298,  461. 
dealings  between  such  firms,  196. 
cannot  sue  at  law,  219. 

COMPENSATION— 

partner  not  entitled  to  extra,  unless  stipulated  for,  178. 

COMPETITION— 

duty  of  partner  not  to  carry  on  business  in  competition  of  firm,  172. 
of  conflicting  claimants  to  assets,  452,  456. 
see  APPLICATION  OF  ASSETS. 

COMPROMISE— 

power  of  partner  to,  261. 

CONFESSION  OF  JUDGMENT— 

implied  authority  of  partner  for,  262. 

CONSTRUCTION— 

of  partnership  articles,  115. 

CONSULTING— 

duty  of  partners  as  to,  176. 

CONTEMPLATED  PARTNERSHIPS— 

when  become  charged  with  liability,  30,  31,  63. 

CONTINUING  PARTNER— 

right  of,  to  use  former  firm  name,  125,  126. 

CONTINUING  PARTNERSHIP— 
under  old  articles,  117. 

486 


INDEX 
[REFERENCES  ARE  TO  SECTIONS] 

CONTRACT  RELATION— 
partnership  is,  4. 

CONTRACTS— 

implied  authority  of  partner  to  make,  244. 

who  are  bound  by,  285. 

how  when  made  by  partner  in  his  own  name,  288,  289. 

how  when  made  in  individual  names  of  all  partners,  295. 

how  when  firm  does  business  in  name  of  one  partner,  296. 

how  when  two  firms  of  same  name  have  common  member,  298. 

obligations  of  partners  upon,  is  joint,  308. 

who  should  be  sued  in  actions  upon,  333  et  seq. 

who  should  sue  in  actions  upon,  325  et  seq. 

illegal  effect  of,  42-46. 

CONTRIBUTION— 

partner  entitled  to,  who  pays  more  than  his  share,  187-190. 

how  enforced,  190. 

when  entitled,  if  transaction  illegal,  46,  188. 

CONVERSION— 

of  firm  property  into  individual  property,  446-448. 
of  firm  land  into  personalty,  163. 

CO-OWNERSHIP  (see  JOINT  TENANCY;  TENANCY  IN  COMMON). 

CORPORATION— 

how  partnership  differs  from,  8. 
what  constitutes  de  facto  corporation,  17-28. 

whether    members    of    defectively    organized    corporations    are    part- 
ners, 17-28. 
power  of  corporations  to  enter  into  partnership,  53. 

COX  v.  HICKMAN— 

effect  of,  on  law  of  partnership,  88-98. 

CREDITORS— 

priority  of,  in  partnership  assets,  449  et  seq. 
firm  creditors  first  paid  out  of  firm  assets,  449. 
individual  creditors  first  paid  out  of  individual  assets,  453. 

DEATH— 

operates  to  dissolve  partnership,  361. 

DEBTS— 

order  of  payment  of,  out  of  assets,  438  et  seq. 

priority  of,  449  et  seq. 

power  of  firm  to  assume  debts  of  partner,  444. 

of  partner  to  assume  debts  of  firm  (see  ASSUMING  DEBTS). 

487 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

DECEASED  PARTNER— 

interest  of  estate  of,  in  partnership  assets,  402,  403. 
liability  of  his  estate,  411. 

DECEIT— 

dissolving  partnership  for,  373. 

DECLARATIONS  (see  ADMISSIONS). 

DECREE— 

of  dissolution,  373  et  aeq. 

DEEDS  AND  OTHER  SEALED  INSTRUMENTS— 
implied  authority  of  partner  to  execute,  263,  264. 

DE  FACTO  CORPORATION— 
what  constitutes,  17-28. 

DEFECTIVELY  ORGANIZED  CORPORATIONS— 
are  not  partnerships,  when,  17-28. 

DELECTUS  PERSONARUM— 
right  of,  57. 

DISSENT— 

power  of  partner  to  dissent  from  contemplated  acts,  242. 

DISSOLUTION— 

causes  for,  344  et  seq. 

by  original  agreement,  345—347. 

by  act  of  parties,  349-359. 

by  act  of  law,  360-380. 

by  death,  361. 

by  marriage,  366. 

by  war,  369. 

by  guardianship,  367. 

by  insanity,  365. 

by  bankruptcy,  362. 

by  sale  of  partner's  interest,  146,  363-364. 

notice  of,  387  et  seq. 

to  whom  given,  390. 

when  required,  389. 

how  given,  391,  392. 

by  whom  given,  396. 
effect  on  powers  of  partners,  399  et  seq. 

of  surviving  partner,  402-407. 

of  liquidating  partner,  426. 

of  partners  generally,  423-425. 

488 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

DORMANT  PARTNER— 
who  is,  41. 
how  liable,  287. 

when  should  be  party  to  action,  325,  335. 
when  should  give  notice  of  dissolution,  397. 
has  no  lien  as  against  creditors  of  ostensible  partners,  459-460. 

DOWER— 

when  widow  of  partner  entitled  to,  in  partnership  lands,  165. 

DUTIES— 

of  partners  to  each  other,  170-190. 
to  exercise  good  faith,  170. 
not  to  compete  in  business,  172. 
to  exercise  care  and  skill,  173. 
to  conform  to  partnership  agreements,  174. 
to  keep  accounts,  175. 
to  consult  with  other  partners,  176. 
to  permit  others  to  participate  in  management,  177. 
to  indemnify  copartners,  187-190. 

ENTITY— 

partnership  as  a  distinct,  6. 

EQUITY— 

the  Jorum  for  partnership  actions,  221. 
what  actions  maintainable  in,  221-232. 

ESTOPPEL— 

partnership  liability  by,  99-108. 

EVIDENCE— 

of  existence  of  partnership,  64-66. 

of  partnership  by  holding  out,  99  et  seq. 

EXECUTION— 

sale  of  partner's  interest  upon,  148. 

levy  on  partner's  property  for  firm  debt,  314. 

exemptions  from,  316. 

EXECUTOR— 

interest  of  in  partnership  assets,  402,  403. 

EXEMPTIONS— 

power  of  firm  or  partner  to  claim,  316. 

489 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

EXPULSION— 

of  partner,  authority  for,  368. 
effect  of,  368. 

EXTRA  COMPENSATION— 
see  COMPENSATION. 

FIRM— 

meaning  of  term,  1. 
see  PARTNERSHIP. 

FIRM  NAME— 

necessity  of,  120. 

what  may  be,  121. 

what  may  be  done  in,  123. 

property  in,  124. 

right  to,  upon  sale  or  dissolution,  125-129. 

FRAUD— 

as  ground  for  dissolving  partnership,  373-375. 

liability  of  firm  for  partner's,  301. 

liability  of  one  partner  to  another  for,  215,  216. 

FRAUDULENT  CONVEYANCES— 

what  conveyances  by  partners  deemed  fraudulent  as  to  firm  creditors, 
443-448. 

GENERAL  PARTNER  (see  LIMITED  PARTNERSHIP) — 
who  is,  41,  475. 

GENERAL  PARTNERSHIP— 
what  constitutes,  32. 

GOOD  FAITH— 

duty  of  partners  to  exercise  to  each  other,  170. 

GOOD  WILL— 

what  constitutes,  127. 

as  an  asset,  128. 

disposal  of,  on  dissolution,  129. 

GUARANTY— 

partner  no  implied  power  to  bind  firm  by,  277. 

GUARDIANSHIP— 

when  dissolves  partnership,  367. 

490 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

HIRING  PROPERTY— 

implied  power  of  partner  as  to,  265. 

HOLDING  OUT— 

liability  as  partner  by,  99  et  aeq. 

ILLEGAL  OBJECTS— 

effect  of,  on  partnership,  42-46. 

ILLEGALITY— 

as  cause  for  dissolution,  370. 
no  lien,  when  illegal,  437. 

IMPLIED  AUTHORITY— 
of  partners,  246  et  seq. 

IMPOSSIBILITY  OP  SUCCESS— 
as  ground  for  dissolution,  380. 

INCOMING  PARTNER— 
liability  of,  318. 

INDEMNITY— 

partner  entitled  to,  when,  187-190. 
action  for  not  furnishing,  212. 

INDISSOLUBLE  PARTNERSHIP— 
can  there  be,  355  et  seq. 

INDIVIDUAL  LIABILITY— 

of  partners  for  firm  debt,  etc.,  313. 

INDIVIDUAL  PROPERTY— 

may  be  taken  for  firm  debts,  314. 

rights  of  individual  creditors  to,  on  insolvency,  453. 

power  of  partner  to  use  in  paying  firm  debts,  445. 

INFANT— 

may  be  a  partner,  49,  50. 
powers  of,  as  partner,  50. 
dissolution  by,  49,  50. 
ratification  by,  50. 

INJUNCTION— 

when  granted  in  partnership  controversies,  226. 

491 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

.INSANITY— 

effect  on  capacity  to  be  partner,  51. 
dissolution  of  firm  for,  365. 

INSOLVENCY— 

as  ground  for  dissolution,  362. 

INSURANCE— 

implied  powers  of  partner  as  to,  266. 

INTENTION— 

as  test  of  partnership,  72,  73,  84. 

INTEREST— 

on  advances  or  capital,  partner  not  entitled  to,  without  agreement 
182,  183. 

JOINT— 

partnership  obligations  in  contract  are,  308. 
in  tort,  joint  and  several,  312. 

JOINT-STOCK  COMPANIES— 

how  different  from  partnership,  9,  10,  35. 

JOINT  TENANCY— 

how  partnership  differs  from,  11. 

JOINT  VENTURE— 

how  differs  from  partnership,  16,  43. 
when  suit  at  law  between  associates,  206. 

JUDGMENT— 

against  one  partner  bars  action  against  firm,  309,  310. 

LAND— 

may  be  partnership  to  deal  in,  42. 

how  affected  by  statute  of  frauds,  61. 
the  implied  authority  of  one  partner  to  sell,  275. 
when  particular  land  deemed  to  be  partnership  property,  166. 
right  to  take  in  firm  name,  153  et  seq. 
interest  of  partners  in,  162. 
dower  and  inheritance  in,  163,  165. 
when  deemed  personal  property,  163. 
bona  fide  purchaser  from  partner  having  legal  title,  167. 
interest  of  surviving  partner  in,  169. 

492 


INDEX 

[REFERENCES  AIJE  TO  SECTIONS] 

LIABILITY  OF  PABTNEES— 

upon  authorized  contract  of  partners,  285. 

upon  contracts  made  in  partner's  own  name,  288-293. 

upon  contracts  generally,  285-299. 

extent  of  liability,  313. 

for  torts,  301-304. 

for  partner's  negligence,  301. 

for  partner's  malicious  or  criminal  act,  302. 

for  partner's  breach  of  trust,  304. 

liability  joint  in  contract,  308. 

joint  and  several  in  tort,  312. 

beginning  and  ending  of,  317-321. 

LIEN— 

firm  creditors  no  lien  on  assets  of  firm,  441. 
partners  have  such  a  lien,  142,  431,  432. 
attaches  to  what,  433. 
good  against  whom,  434. 
secures  what,  435. 
how  lost,  436,  459. 

LIMITED  PAETNEESHIP— 
nature  of,  475. 

must  be  authorized  by  statute,  476. 
statutory  requirements,  477. 
statute  must  be  complied  with,  478. 
conduct  of  business,  481. 
for  what  business  may  be  organized,  480. 
dissolution  of,  485. 

LIQUIDATING  PAETNEE— 
rights  and  powers  of,  426. 

LOSSES— 

sharing  of,  as  test  of  partnership,  84. 

MAJOBITY— 

power  of,  281,  282. 

MANAGEMENT— 

right  of  each  partner  to  participate  in,  177. 

MANAGING  PAETNEE— 

duty  to  exercise  good  faith,  170,  426. 
authority  of,  278-280. 

493 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

MARRIAGE— 

when  dissolves  partnership,  366. 

MARRIED  WOMAN— 

capacity  to  be  a  partner,  52. 

MISCONDUCT— 

of  partner  as  ground  for  dissolution,  377. 

MORTGAGE— 

power  of  partner  to  make,  267. 

NAME  (see  FIRM  NAME). 

NEGLIGENCE— 

liability  of  partner  to  partners  for,  173. 
liability  of  firm  for  negligence  of  partners,  301. 

NEGOTIABLE  INSTRUMENTS   (see  BILLS  AND  NOTES). 

NOMINAL  PARTNER— 
who  is,  41. 
liability  of,  99,  287. 

NON-TRADING  PARTNERSHIP— 
what  is,  241. 
power  of  partner  to  make  bills  and  notes,  255-257. 

to  buy,  259. 

to  borrow  money,  250. 

NOTICE— 

to  partner  as  notice  to  firm,  when,  270. 

NOTICE  OF  DISSOLUTION— 
necessity  for,  387,  398. 
in  what  eases  required,  388. 
to  whom  given,  390. 
how  given,  391-393. 
who  should  give,  396. 
of  limited  partnership,  455. 

NOVATION— 

new  contract  by,  on  dissolution  of  firm,  429. 

OSTENSIBLE  PARTNER— 
who  is,  41. 
liability  of,  113. 

494 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 
OSTENSIBLE  PARTNERSHIP— 

distribution  of  assets  where  partnership  is  merely  ostensible,  459. 
where  partnership  is  actual  but  not  ostensible,  459-460. 

OUTGOING  PARTNER— 
liability  of,  321. 

PARTIES  (see  ACTIONS). 

PARTNERS— 
defined,  1. 
how  classified,  41. 
who  may  be,  47. 
number  of,  56. 
how  persons  become,  67-107. 
rights  and  duties  of  to  each  other,  170-190. 
actions  between,  197-232. 
authority  of,  as  between  themselves,  235,  236. 

as  respects  third  persons,  237-283. 
majority  of,  powers,  281,  282. 
who  are  bound  by  acts  of,  284-304. 
liability  of,  307-321. 

PARTNERSHIP— 
defined,  1. 

essential  elements  of,  2. 
is  contractual  relation,  4. 
whether  a  distinct  entity,  6. 
commercial  conception  of,  7. 
how  differs  from  corporation,  8. 

from  other  associations,  9,  10. 

from  joint  tenancy  and  co-ownership,  11,  12. 

from  joint  purchasers  of  goods  for  resale,  14. 

whether  defectively  organized  corporation  is,  17-28. 

promoters  of  companies  not  partners,  29. 
when  contemplated  become  consummated,  30,  31. 
classification  of,  32. 
for  what  purposes  created,  42-46. 
who  competent  to  enter  into,  47-54. 
what  formalities  required  to  create,  59. 
how  existence  proven,  65. 
what  acts  and  contracts  create,  67-108. 
tests  of,  74,  85. 

distinction  between  partnership  inter  se  and  as  to  third  persons,  68. 
by  "holding  out,"  99-108. 
articles  of,  113  et  seq. 

495 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

PAETNEESHIP— Continued 
property  of,  138  et  seq. 
name  of,  120  et  seq. 
good- will  of,  127  et  seq. 
capital  of,  133  et  seq. 
dissolution,  344  et  seq. 

PAETNERSHIP  AETICLES— 
necessity  for,  113. 
how  far  conclusive,  114. 
how  construed,  115. 

enlargement  and  waiver  of  provisions  of,  116. 
continuing  under  old,  117. 
usual  clauses  in,  118. 
how  enforced,  119. 

PAYMENT— 

implied  power  of  partner  to  receive,  260. 
implied  power  of  partner  to  make,  272. 

PEE8ONAL  PEOPEETY— 

what  constitutes  property  of  firm,  139. 
may  be  held  in  firm  name,  150. 

or  in  name  of  one  partner,  151. 
title  in  firm  collectively,  152. 
interest  of  each  partner  in,  145. 

PEESONAL  TEUSTS— 

cannot  be  executed  by  partnership,  44. 

PLEDGE— 

implied  authority  of  partner  to,  267. 
authority  of  surviving  partner  to,  403. 

POWEES  OF  PAETNEE— 

as  between  the  partners,  235,  236. 

what  implied,  236. 
as  respects  third  persons,  237  et  seq. 
limited  by  usage,  236. 
limited  by  scope  of  business,  246. 
implied  powers  in  particular  eases,  250-277. 
after  dissolution,  423. 
of  surviving  partner,  402. 

PEINCIPAL  AND  SUEETY— 

when  continuing  and  retiring  partner  stand  as,  428. 

496 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

PRIORITY— 

of  firm  creditors  in  partnership  assets,  449  et  seq. 

of  individual  creditors  in  individual  assets,  453  et  seq. 

PROFITS— 

sharing  of,  as  test  of  partnership  inter  se,  74-83. 
as  test  of  partnership  as  to  third  persons,  86-98. 

PROMISSORY  NOTES  (see  BILLS  AND  NOTES). 

PROMOTERS— 

of  corporations,  not  liable  as  partners,  29. 

PROPERTY  OF  PARTNERSHIP— 
what  may  be,  138. 
what  constitutes,  139. 

property  bought  by  partner  in  his  own  name,  140. 
property  used  by  firm,  141. 
interest  of  partners  in,  143-145. 
to  be  applied  to  partnership  debts,  184. 

PUBLIC  OFFICE— 

cannot  be  held  in  partnership,  44. 

PUBLIC  POLICY— 

purposes  opposed  to,  44. 

PURCHASE— 

implied  power  of  partner  to,  259. 

PURPOSE— 

for  what  partnerships  may  be  organized,  42. 
effect  of  illegal,  46. 

QUASI-PARTNERSHIP— 

what  constitutes,  85  et  seq. 

RATIFICATION— 

by  infant  partner,  49,  50. 

by  firm,  of  partners'  acts,  283. 

of  execution  of  sealed  instruments,  263,  264. 

REAL  ESTATE  (see  LAND)— 
of  partnership,  153-169. 
interest  of  partners  in,  162. 
liability  of,  156  et  seq. 

Mech.  Part.— 32  497 


INDEX 

[REFERENCES  ABE  TO  SECTIONS] 

RECEIVER— 

appointment  of,  in  partnership  controversies,  231,  232. 

REIMBURSEMENT  (see  CONTRIBUTION;  INDEMNITY) — 
•action  for  not  reimbursing  as  agreed,  212. 

RELEASE— 

authority  of  partner  to  give,  260,  263,  264. 
effect  of  release  of  one  on  liability  of  residue,  311. 

REMEDIES  (see  ACTIONS). 

RENEWAL  OF  PARTNERSHIP  (see  CONTINUING  PARTNERSHIP;  LIMITED 
PARTNERSHIP). 

REORGANIZATION— 

when  results  in  dissolution,  372. 

•'  /•'•'' 
RERESENTATIONS  (see  ADMISSIONS). 

RESCISSION— 

of  partnership  contract  for  fraud,  373. 

RETIRING  PARTNER— 

right  to  use  old  firm  name,  125. 
right  to  continue  business,  126. 
duty  to  give  notice  of,  396. 
liability  of,  398. 

SALE— 

implied  authority  of  partner  to  sell  personal  property,  274. 
to  sell  real  property,  275. 

SCOPE  OF  BUSINESS— 
what  is  meant  by,  247. 
extending  by  conduct,  248. 
limitations  imposed  on  partners'  power  by,  246. 

SEAL— 

partner  no  implied  power  to  execute  instruments  under,  263,  264. 
ratification  of,  264. 

SECRET  PARTNER— 
who  is,  41. 
liability  of,  287. 
action  by  and  against,  335. 

498 


INDEX 

[REFERENCES  ABE  TO  SECTIONS] 
SEPARATE  CREDITORS— 

right  of,  to  have  payment  out  of  separate  assets,  463  et  seq. 

SERVANTS— 

liability  of  firm  for  acts  of,  306. 

SET  OFF — 

of  individual  and  partnership  claims,  340. 
under  statutes,  341. 
in  equity,  342. 

SHARE  OF  PARTNER— 
what  constitutes,  143-145. 
sale  of,  146,  147. 
seizure  on  execution,  148. 

SILENT  PARTNER— 
who  is,  41. 
liability  of,  287. 
actions  by  and  against,  335. 

SINGLE  VENTURE— 

whether  associations  for,  are  partnerships,  16,  43. 

SPECIAL    PARTNER    (see    LIMITED   PABTNEBSHIP;    SPECIAL   PARTNEB- 
SHIP). 

SPECIAL  PARTNERSHIP  (see  LIMITED  PABTNEBSHH>). 

SPECIFIC  PERFORMANCE— 

of  partnership  agreements,  222-224. 

STATUS— 

whether  partnership  is,  4. 

STATUTE  OF  FRAUDS— 

when  requires  partnership  to  be  created  by  writing,  59-61a. 

STATUTE  OF  LIMITATIONS— 

power  of  partner  to  waive,  after  dissolution,  425. 

SUB-PARTNERSHIP— 
what  constitutes,  58. 
rights  and  liabilities  of  members  of,  58. 

SUIT  (see  ACTIONS). 

499 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

SURETY— 

one  partner's  implied  power  to  bind  firm  as,  277. 

SURVIVING  PARTNER— 

right  to  use  former  firm  name,  125,  126. 
rights  and  powers  of,  402  et  seq. 
interest  of,  in  real  property,  169. 

SYNDICATES— 

whether  to  be  deemed  partnerships,  16,  43. 

TENANCY  IN  COMMON— 

how  differs  from  partnership,  11,  12. 

TEST  OF  PARTNERSHIP— 

as  between  partners  themselves,  69-84. 
as  respects  third  person,  85-108. 
sharing  profits  as,  75,  86. 

TORT— 

liability  of  partners  in,  301. 
liability  in,  joint  and  several,  312. 
actions  for,  parties  to,  330,  338. 

TRADING  FIRM— 
what  is,  241. 

power  to  make  negotiable  paper,  255-257. 
to  borrow  money,  258. 
to  buy  property,  259. 

TRANSFER  OF  SHARE— 

dissolves  partnership,  146,  363,  364. 

TRUSTS— 

how  compare  with  partnerships,  40. 

UNIFORM  FRAUDULENT  CONVEYANCE  ACT— 
See  Appendix  A. 

UNIFORM  LIMITED  PARTNERSHIP  ACT— 
See  Appendix  A. 

UNIFORM  PARTNERSHIP  ACT— 
See  Appendix  A. 

UNIVERSAL  PARTNERSHIP— 
what  constitutes,  32. 

500 


INDEX 

[REFERENCES  ARE  TO  SECTIONS] 

USAGE— 

effect  on  power  of  partners,  236. 

WAIVER— 

of  provisions  of  articles  by  conduct,  116. 

WAR— 

dissolves  partnership,  369. 

WILL— 

continuing  business  under,  407. 

WINDING  UP  (see  ACCOUNTING;  APPLICATION  OF  ASSETS;  PRIORITY) , 


501 


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